Affordable Care Act Q&A

At this point, most employers understand the basics of the Affordable Care Act (ACA) but they may still have questions about many of its details. The IRS recently issued a series of Q&As to help answer some specifics.

Here are a few of the 11 selected questions from the IRS, along with answers that are edited for space limitations. The remaining questions and answers are available here.

How Does an Employer Know Whether the Coverage it Offers Is Affordable?

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5 percent of his or her annual household income, the coverage is not considered affordable. Because employers generally won’t know their employees’ household incomes, employers can take advantage of one or more of the three affordability safe harbors set forth in the final regulations that are based on information the employer will have available.

The three affordability safe harbors are:

  • The Form W-2 wages safe harbor;
  • The rate of pay safe harbor, and
  • The federal poverty line safe harbor.

These safe harbors are all optional. An employer may use one or more of them only if the employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that provides minimum value for the self-only coverage offered to the employee.

Q. What are the Employer Shared Responsibility provisions? When do they go into effect?

For 2015 and later, employers with at least a certain number of employees (generally 50 full-time or a combination of full-time and part-time employees that is equivalent to 50 full-timers) will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code. (This is sometimes called “the employer mandate.”)

As defined by the statute, a full-time employee is employed on average at least 30 hours per week.

An employer that meets the 50 full-time employee threshold is referred to as an applicable large employer. If these employers don’t offer affordable health insurance that provides a minimum level of coverage to their full-timers (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called the Health Insurance Marketplace.

The Shared Responsibility provisions aren’t effective until January 1, 2015, meaning no payments will be assessed for 2014. Employers will use information about the number of employees they employ and their hours during 2014 to determine whether they’re considered an applicable large employer for 2015.

Q. How many employees must an employer have to be subject to the Shared Responsibility provisions?

(More details here for this question and for the questions listed below)

Q. Are companies that employ U.S. citizens working abroad subject to the Employer Shared Responsibility provisions?

Q. Which employers aren’t subject to the Shared Responsibility provisions?

Q. How does an employer identify full-time employees for purposes of the Shared Responsibility provisions?

Q. Are there special rules for hours of service that are challenging to identify or track?

Q. Is additional transition relief available for employers with at least 50 but fewer than 100 full-time employees (including full-time equivalents)?

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