1. What must I do to avoid the employer taxes?
Beginning in 2015, if you average enough full-time employees or full-time employee equivalents during a calendar year to be considered an “applicable large employer,” to avoid the shared-responsibility penalty you must provide medical coverage that:
- Provides “minimum essential coverage;” and
- Is “affordable” and provides “minimum value.”
2. What is an “applicable large employer?”
An “applicable large employer” (large employer) is an employer that had a certain number of full-time and full-time equivalent employees during the prior calendar year. For 2015, a large employer is an employer that has 100 or more full-time or full-time equivalent employees in 2014. An employer with 50 to 99 employees also will be considered large for 2015 if it does not meet coverage maintenance requirements. For 2016 and later, a large employer is an employer that had 50 or more full-time or full-time equivalent employees during the prior calendar year.
3. How do I know if I have 100 or 50 full-time or full-time equivalent employees?
An employee is counted as a full-time employee if the employee was employed an average of 30 hours per week during the prior calendar year.
An employee counts toward a full-time equivalent employee if the employee worked an average of less than 30 hours per week during a calendar month. To calculate the number of full-time equivalent employees for a month, the hours of all full-time equivalent employees are totaled and then divided by 120.
EXAMPLE: During January, Company A has 30 employees who average 40 hours per week, 19 employees who average 30 hours per week, 1 employee who worked 60 hours during the entire month, and 1 employee who worked 82 hours during the month.
Company A has 49 full-time employees [30 + 19] and 1.2 full-time equivalent employees [(60 + 82) ÷ 120 = 1.18]. Therefore, Company A has 50 employees for that month for purposes of the penalty.
Note: There are special rules for employers with seasonal employees. Employers in a controlled group, or affiliated service group, are combined when deciding how many employees they have.
4. Who is an “employee”?
The Patient Protection and Affordable Care Act (PPACA) says that “common law” employees are the workers covered by the law.
5. Do I have to cover dependents?
Employers need to offer coverage to children up to age 26 by 2016 to avoid penalties for not offering coverage. Employers do not have to offer coverage to spouses.
For further information about the health care reform requirements for your business, download UBA's complimentary guide, "PPACA Compliance and Decision Guide for Small and Large Employers" from the PPACA Resource Center at http://bit.ly/1nHbaWv.