When the Affordable Care Act (ACA) was first enacted in 2010, it was with the understanding that changes would be made to the ACA after the fact. Health care reform was a difficult topic to tackle even 70 years prior, so six years ago this mission was always going to face growing pains. Now, as we are halfway through 2016, it’s important to understand what some of those changes are.
As many employers are facing issues surrounding penalties for the 2015 tax year, some of this information is pertinent to avoid repeating those same mistakes for the 2016 tax year.
Here is a tip sheet of some important changes that have gone into effect as of this year:
· 2016 marks the year that the Section4980H Employer Mandate has reached full implementation.
· Applicable Large Employers (ALEs) with 50 or more full-time and full-time equivalent employees must offer health care coverage to 95% of full time employees. Employers must remember that “full-time” means averaging at least 30 hours per week, and not 40 hours per week as commonly understood. If that 95% rate is not met, penalties may follow.
· Health care “affordability” is now measured at 9.66% against the employee’s household income. If the employee’s monthly premium for the healthcare coverage exceeds affordability and that employee obtains a Premium Tax Credit, that employee’s employer may be penalized.
That employer may also be penalized if the employee who receives a Premium Tax Credit had received an offer of healthcare coverage from the employer but that coverage did not provide for “minimum value.” Minimum Value means that the “plan’s share of the total allowed costs of benefits provided under the plan” is at least “60% of such costs.”
The penalty for failing to offer minimum essential coverage has now increased (for ALEs over 100 full-time and full-time equivalents) to $2,160 per full-time in excess of 30 employees.
· Penalties for ALEs’ failure to report health care information has increased to $250 per payee statement (not to exceed $3,000,000). Of course, this assumes that the failure does not constitute “intentional disregard,” which has a corresponding penalty of $500 per payee statement and no cap.
· The Cadillac Tax has been delayed to January 1, 2020.
· Out of pocket maximum expenses have increased this year to $6,850 for individuals and $13,700 for families.
Below is an easy to read table showing penalties for late ACA filers.