The Affordable Care Act (ACA), also known and commonly referred to as Obamacare, can result in a penalty against large employers that don’t offer coverage to their eligible employees. These penalties are often referred to as Employer Shared Responsibility penalties.
For 2015, there are two different types of transition relief that an employer could be qualified for, depending on their number of full time and full time equivalent (FTE) employees, that can help avoid having to pay applicable penalties. Under section 4980H, one of the relief types is specifically for an employer that has 50 to 99 full time and FTE employees. The other is reserved for employers with 100 or more full time and FTE employees. Eligibility for this specific transition relief is reported on IRS form 1094-C.
In addition to their combined full time and FTE employee headcount, in order for an employer to be eligible for one of the section 4980H transition relief types, they must meet the following requirements:
- During a period between February and December of 2014 the employer cannot have reduced the size of their workforce or reduce the hours of their employees.
- During a period between February and either December 2015, or the last day of the 2015 insurance plan year (if the employer is on a non-calendar plan year), the employer cannot eliminate or reduce the healthcare coverage being offered to their workforce.
ACA Related Frequently Asked Questions
Q: What are Employer Shared Responsibilities?
Employers who have a specific number of employees are required by the Internal Revenue Code to offer employees affordable healthcare and are subject to the employer shared responsibility provisions. Employers who are not in compliance with the ACA are required to pay a Shared Responsibility Penalty.
Q: What are the different types of transition relief?
In 2015 there were a total of eight types of transition relief. Eligibility for the different relief types is dependent upon a number of factors. For example, whether or not an employer qualifies for the section 4980H transition relief discussed above is largely dependent on their number of full time and full time equivalent employees.
Q: What if an employer doesn’t offer coverage to their employees?
If an employer with 100 or more combined full time and full time equivalent employees did not offer coverage to their eligible employees in 2015, they could face a penalty. The penalty for not offering coverage is dependent on whether at least 1 of the eligible employees received a subsidy through the federal or state Marketplace and the employer’s number of full time employees(minus 80). When assessing the penalty amount, full time equivalent employees are not considered.
Q: If multiple companies share common ownership are their employees combined in order to determine classification as an Applicable Large Employer (ALE)?
Yes, companies with a large majority of common ownership are treated as one and the employee counts from each are combined. If the combined total number of employees is 50 or more, both companies are considered ALEs and are subject to the Employer Shared Responsibility Provisions.
Q: What are full time equivalent employees?
A full time equivalent (FTE) employee is someone who is not scheduled to work full time but, on average, works more than 30 hours and therefore may be eligible for health insurance through their employer. In order to determine if an employee is considered an FTE, their total number of hours worked over a specified timeframe are added together and divided by 120.
Q: Do Employer Shared Responsibility Provisions only apply to for-profit companies?
All ALEs (Applicable Large Employer) companies are subject to the Employer Shared Responsibility Provisions. This includes, profit, non-profit, and government entities.
Q: If an employee is eligible for healthcare elsewhere, does that affect their current employer?
No, whether an employee is eligible for health insurance coverage elsewhere does not affect their current employer. In order to determine whether an employer is considered an applicable large employer (ALE), the number of full time and full time equivalent employees is added together. If the combined headcount is 50 or more, the employer is classified as an ALE and is required to offer health insurance to all eligible employees.
Q: What if a company in the U.S. has employees working outside the U.S.?
When determining if a company is an ALE, employers will usually only take into account work done in the U.S., meaning if a company that operates worldwide, but has less than 50 employees in the U.S. they would not be subject to the Employer Shared Responsibility Provisions.
Q: Where find help or get more information?
PAYDAY Workforce Solutions can help you with many of your questions regarding transition relief and Employer Shared Responsibility Provisions. We can also help you determine if your current healthcare options are in compliance with ACA regulations and provide you solutions for tracking and reporting for the Employer Shared Responsibility. Give us a call at (714) 467-3434.