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Tag Archive for: aca standards

FAQs: ACA and ALEs – What You Need to Know

March 5, 2023/in ACA Compliance

As an ALE, understanding the regulations set forth by the Affordable Care Act (ACA) can be a daunting task. The employer mandate, minimum essential coverage (MEC), minimum values, and affordability are all crucial guidelines that must be understood to avoid penalties.

In this blog, we will answer some frequently asked questions about ACA and ALEs to help you stay informed and compliant. We will cover topics such as what is an ALE, how to calculate workforce size, common ownership impact on ALE status, timing impact on ALE status calculation, the employer mandate, minimum essential coverage, and more. So, let’s get started!

First, What is an ALE?

An ALE, or applicable large employer, is a company or organization that employs at least 50 full-time equivalent (FTE) employees. The IRS defines a full-time employee as someone who works at least 30 hours per week or 130 hours of service per calendar month.

 Even if a company doesn’t have 50 full-time employees at all times, it just needs to average at least 50 FTEs per month in the current calendar year to be considered an ALE for the following calendar year.

How Does an Employer Calculate Workforce Size to Determine if They’re an ALE?

To determine if your company is considered an ALE, you must add the number of full-time employees and the full-time equivalent of your part-time employees. only U.S employees should be counted. 

To calculate the full-time equivalent of your part-time employees, take the total hours worked by all part-time workers in a month and divide by 120. Then add this number to the total number of full-time employees to get your total FTE count. If you have seasonal workers, they must be included in the FTE count, but you may be able to apply for an exemption if their hours cause the count to exceed 50 or more.

You are eligible for the seasonal worker exemption if you meet the following conditions:

  • Your total number of full-time employees (including FTEs) exceeds 50 for a maximum of 120 days in a calendar year.
  • The excess employees during this period are considered seasonal workers.

How Does Common Ownership Impact ALE Status?

To determine if a group of businesses are considered an ALE, they must be evaluated together as a controlled group. This applies even if the businesses are separate legal entities. If the controlled group is determined to be an ALE, each individual business within the group is considered an ALE, regardless of the total number of employees and is subject to the employer shared responsibility provisions (ESRP) of the ACA.

How Does Timing Impact ALE Status Calculation?

When determining ALE status, it is important to consider the preceding calendar year. Employers who were established during part of the previous year will have their calculations adjusted accordingly. New businesses that did not exist on any day in the previous year will be considered an ALE if they anticipate and do employ an average of 50 or more full-time employees, including full-time equivalentsduring the current calendar year.

What is the Employer Mandate?

The employer mandate, also known as the Employer Shared Responsibility Provisions (ESRP), is a requirement under the Patient Protection and Affordable Care Act (ACA) that applies only to businesses that are considered Applicable Large Employers (ALEs). These employers are required to offer health insurance coverage that meets minimum essential coverage (MEC) and is considered affordable to their full-time employees and their dependents, or they may face penalties. 

Businesses that do not qualify as ALEs are not subject to these requirements or penalties. Only full-time employees, not full-time equivalents, are counted for the purpose of calculating penalties and the first 30 full-time employees are not factored into the calculation.

What is Minimum Essential Coverage?

The Affordable Care Act (ACA) requires that ALEs provide a minimum level of health insurance coverage, known as minimum essential coverage (MEC), to at least 95% of their full-time employees. This is to avoid paying penalties under the employer shared responsibility provisions (ESRP). 

To meet this requirement, ALEs must offer their employees the opportunity to enroll in a health insurance plan that meets the standards set forth by the ACA, such as those offered in the small or large group market, grandfathered health plans, or certified by the Health Insurance Marketplace.

How is Affordability Defined and Calculated?

To be considered “affordable” under the Affordable Care Act, a health plan’s cost for an employee cannot exceed 9.12% of their annual household income in 2023. This calculation is based on the employee’s salary and the lowest cost silver plan available for their age and location.

Does the Employer Mandate Require Coverage be Offered to Dependents?

The employer mandate under the ACA stipulates that ALEs must provide qualified and affordable health coverage options to their employees and their eligible dependents. According to the mandate, dependents are defined as an employee’s child under the age of 26, including adopted or placed for adoption children. It should be noted that spouses, stepchildren, foster children, or non-U.S. citizen children not living in the U.S. or a contiguous country do not fall under the definition of dependents.

When Would an Employer be Subject to Potential Employer Shared Responsibility Penalties?

There are two types of financial penalties for ALEs (Applicable Large Employers) under Section 4980H of the Internal Revenue Code. The first penalty (4980H(a)) applies to ALEs that do not offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and dependents. The second penalty (4980H(b)) applies to ALEs that do not offer affordable coverage to their full-time employees and dependents.

If an ALE fails to meet these requirements and at least one full-time employee receives federal subsidies, such as premium tax credits for purchasing essential coverage through the Marketplace, the ALE will be subject to penalties. 

How Much are the Penalties for Failing to Meet the Employer Mandate?

The IRS updates the penalties for employer mandates annually. In 2023, the penalties are as follows:

 

  • Section 4980H(a) penalty: ALEs that do not provide Minimum Essential Coverage to 95% of full-time employees will face a penalty of $2,880 per full-time employee.
  • Section 4980H(b) penalty: ALEs that do not offer affordable or minimum value coverage will face a penalty of $4,320 per full-time employee.

These penalties may be adjusted based on the number of employees who received subsidies for coverage and how many months employees were not covered. The IRS will apply the higher penalty of the two options, meaning that both penalties cannot be imposed simultaneously.

Still Have Questions?

The best way for employers to remain compliant with healthcare laws is to consult with a team of professionals. Our team at SBMA understands the ACA and can help you stay up-to-date on any changes to the law. 

https://www.sbmabenefits.com/wp-content/uploads/2023/02/iStock-843617064.jpg 1330 2254 Nathan Ines https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png Nathan Ines2023-03-05 09:00:552023-02-09 10:28:31FAQs: ACA and ALEs – What You Need to Know

ACA is Here to Stay

November 20, 2022/in ACA Compliance

The Affordable Care Act, also known as Obamacare, was one of the biggest healthcare overhauls in recent history. It aimed to provide affordable health insurance coverage for all Americans. After several failed attempts to repeal the act, it seems that ACA is here to stay. 

In this blog post, we will take a closer look at what this means for American taxpayers and businesses.

What Is the Affordable Care Act (ACA)?

The Affordable Care Act was passed in 2010 and since then it has been under constant threat of repeal. The law required all Americans to have health insurance coverage or face a tax penalty. It also expanded Medicaid coverage and provided subsidies to help people afford private health insurance plans.

In 2017, Republican lawmakers attempted to repeal the Affordable Care Act but were unsuccessful. This led to a lot of uncertainty about the future of the law. However, it now seems that ACA is here to stay, at least for the time being.

What Does this Mean for American Taxpayers?

For starters, it means that the tax credits and subsidies that help people afford their health insurance coverage are still in place. It also means that the Medicaid expansion, which has provided coverage for millions of low-income Americans, is still in effect.

Taxpayers will continue to be responsible for funding the ACA. This includes the subsidies that help people pay for health insurance and the Medicaid expansion. The good news is that, because the ACA is no longer being repealed, there will be no need for major changes to the tax code.

What Does this Mean for Businesses?

The Affordable Care Act requires businesses with 50 or more employees to provide health insurance coverage for their workers. This requirement is still in place, so businesses will need to continue to comply with it.

There may be some changes to the way this is done in the future. For example, the government may provide more subsidies to help businesses cover the cost of health insurance. 

Overall, the news that ACA is here to stay is good news for American taxpayers and businesses. It provides stability and certainty in an uncertain time.

Final Thoughts

The Affordable Care Act has provided many benefits, including increased access to healthcare, lower costs for prescription drugs, and free preventive care services. These benefits are worth billions of dollars each year and help to improve the lives of millions of Americans.

There is still some uncertainty about the future of the Affordable Care Act, but for now, it seems that the law is here to stay. This is good news for American taxpayers and businesses who have benefited from the law’s many provisions.

If you’re interested in learning more about the ACA, read our articles on the advantages of the ACA and  what business owners should know about ACA benefits. 

https://www.sbmabenefits.com/wp-content/uploads/2022/11/iStock-1141247654.jpg 1414 2121 Nathan Ines https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png Nathan Ines2022-11-20 08:00:452022-11-18 09:30:25ACA is Here to Stay

The Individual Mandate: What Employers Need to Know

August 14, 2022/in News

The California Individual Mandate, originally signed into law in 2019, was a response to the federal individual mandate being struck down by the Trump administration.

 

This state law requires all California residents obtain Minimum Essential Coverage (MEC) for a minimum of nine months, or they may face a tax penalty unless exempt.

 

Let’s discuss the individual mandate and what employers need to know, starting with a shorthand list of exemptions.

MEC Exemptions

According to the State of California Franchise Tax Board, some exemptions include:

 

  • An individual’s income is below the state tax filing threshold
  • A coverage gap consists of three consecutive months or less
  • Coverage is not affordable based on the income reporting in your state income tax return
  • If the cost of the lowest plan, whether marketplace or employer-sponsored, is more than 8.09% of income on an individual’s tax return
  • The cost of the lowest employer-sponsored family plan, including dependents, is more than 8.09% of the household income
  • Non-citizens who are not lawfully present in the state
  • Those who are living abroad or are residents of another state
  • Members of a health care sharing ministry
  • Enrolled in limited or restricted-scope Medi-Cal or other similar coverage
  • Those in federally recognized tribes are eligible for services through an Indian health care provider or the Indian Health Service
  • Those in jail, except for incarceration, pending the disposition of charges

 

These exemptions typically must be claimed on your state income tax return.

 

While the individual mandate went into effect “to reduce the number of uninsured individuals and families,” it also has implications for employers in California. Moreover, the law requires additional reporting from specific organizations.

Employer Reporting Required by the Individual Mandate

Employers must report insurance information to the Franchise Tax Board (FTB) of California by March 31. The data reported includes the enrollment participation of employees and their dependents.

 

Employers with an insurance provider who reports to the FTB are not required to report in addition to their provider.

What are the Penalties for Not Reporting Insurance Information to the FTB?

Employers who do not meet the filing deadlines of the FTB are subject to a $50 penalty for every employee receiving coverage.

 

Individually, there is a flat penalty per household member or 2.5% of the gross household income, whichever is higher. If an individual does not obtain coverage for the entire year, they would be subject to a minimum fine of $800. 

Why Are There ACA Reporting Requirements for Employers?

For applicable large employers (ALE), the FTB introduced these reporting requirements to help enforce the state’s healthcare mandate.

 

Employers who offer self-insured or employer-sponsored plans must report individual enrollment through Form 3895C unless their insurer reports via Form 1095-B. 

 

These reports allow the FTB to verify an individual’s coverage and identify who must pay an individual shared responsibility provision (ISRP).

 

This sounds like a lot, but don’t worry. At SBMA, we take care of all ACA reporting required for the ALEs we work with. We submit Forms 1095-B and 1095-C to ensure you comply with ACA requirements.

Individual Mandates in Other States

Individual mandates are becoming a more common practice in states other than California. The current states who have individual healthcare mandates include:

 

  • California
  • The District of Columbia
  • Massachusetts
  • New Jersey
  • Rhode Island, and
  • Vermont

 

Read our article “Understanding the Affordable Care Act Individual Mandate” for a more detailed look at each state’s requirements.

A Final Word

As an employer, it is essential to understand the individual mandate to ensure you remain compliant with reporting requirements and avoid hefty fines.

 

The best way to stay on top of these requirements is to partner with an insurance provider who handles your reporting. Look at our employer resources page for more information on how we assist employers with their health coverage needs.

https://www.sbmabenefits.com/wp-content/uploads/2022/07/iStock-959508042-scaled.jpg 1707 2560 maddie https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png maddie2022-08-14 07:00:102022-08-24 10:32:35The Individual Mandate: What Employers Need to Know

1094/1095 PCORI Compliance: What You Need to Know

June 5, 2022/in ACA Compliance, News

Businesses that provide health benefits for their employee workforce must submit the right forms proving that they offered the required benefits. Now that 1094/1095 filing is complete, it’s time to prepare for federally mandated annual PCORI fees. Are you prepared? Let’s discuss 1094, 1095, and PCORI compliance. 

How Can Applicable Large Employers Stay Compliant?

Applicable Large Employers (ALEs), employers with 50 or more full-time employees, must offer Affordable Care Act (ACA) compliant health benefits to at least 95% of their workforce. Failure to do so can result in hefty fines and penalties from the Internal Revenue Service (IRS). 

The IRS can issue ALEs Penalty A or Penalty B fines for ea

ch employee that is not offered correct or compliant benefit plans. Employers can avoid unnecessary fines and penalties by offering ACA Compliant Minimum Essential Coverage (MEC). MEC benefit plans allow employers to provide affordable benefits to their employees without compromising their bottom line. 

In order to verify employers are, in fact, offering ACA compliant benefits, the IRS requires employers to fill out form 1094 and 1095. 

Employers must complete Form 1094, which is used to determine their liability for payment under the employers’ shared responsibility provision. Form 1095, however, is used as a summary of healthcare information the ALE offers employees. 

What Can SBMA Do For You?

One of the many services we provide at SBMA Benefits is 1094 and 1095 Form processing. We simplify the complexity of providing employee benefits while simultaneously ensuring ACA compliance. 

What’s included in our 1094/1095 processing?

  • Electronic filing of 1094 and 1095 forms annually 
  • PDF soft copies of 1095 for employee distribution 
  • 1095 error corrections refiling (if applicable) 
  • Mail distribution

What Happens After I Submit Forms 1094 and 1095?

After submitting Forms 1094 and 1095 by their due date, March 31st, employers must pay fees to the Patient-Centered Research Institute (PCORI) by July 31st. This year, however, the due date has been extended to August 2nd since the previously mentioned due date lands on a Saturday. 

What is PCORI and Why Do I Have to Pay Their Fees?

PCORI was created to improve the quality, quantity, timeliness, and trustworthiness of health information for patients. 

According to the PCORI, its mission is to “help people make informed healthcare decisions, and improve healthcare delivery and outcomes, by producing and promoting high-integrity, evidence-based information that comes from research guided by patients, caregivers, and the broader healthcare community.”

Employers are responsible for paying PCORI trust fund fees annually. The amount employers owe depends on the number of people enrolled in their offered benefits program. 

The fee is calculated based on the average number of individuals covered in a benefits plan- including spouses, dependents, retirees, and COBRA participants. Currently, PCORI fees are $2.79 per enrollee. In 2021, PCORI fees cost $2.66 per enrollee. 

The fee was slated to end in 2019, but was extended via Trump’s Further Consolidated Appropriations Act of 2020. For now, PCORI fees are extended through 2029. 

For more information on Forms 1094 and 1095, read our article: What you need to know about 1094/1095 Filing. 

https://www.sbmabenefits.com/wp-content/uploads/2022/06/iStock-1313069986.jpg 1415 2119 maddie https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png maddie2022-06-05 07:00:402022-05-06 13:41:371094/1095 PCORI Compliance: What You Need to Know

Understanding Minimum Essential Coverage Options

January 31, 2021/in ACA Compliance, MEC

Understanding the various minimum essential coverage plans that you can offer your employees is essential to providing coverage that matters. At SBMA, we offer the most competitive limited medical plans in the industry. We ensure every client remains ACA compliant by offering our medical plans.

SBMA benefits serve employers with ACA mandated compliance requirements. It supports those employers by offering employees who need affordable benefits the right solution for them. Our mission is to provide great benefits at a great price. SBMA is nationally recognized as industry experts on ACA compliance, ERISA law, and Healthcare Reform, and we’re here to help!

Read more
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How much can you save with MEC?

October 5, 2020/in ACA Compliance, MEC

How much can you save with MEC? Minimum Essential Coverage (MEC) is coverage that complies with ACA requirements. The Affordable Care Act (ACA) states that all employers with 50 or more full-time employees- Applicable Large Employers- are required to provide coverage to all eligible employees or they will be subject to fines/ penalties.

Read more
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What is MEC and What Does it Cover?

August 31, 2020/in ACA Compliance, MEC, News, Voluntary Benefits

Understanding Minimum Essential Coverage (MEC) can be complicated when compared to minimum value, essential health benefits, and actuarial value.
Let’s start by answering what is it and what does it cover? Minimum Essential Coverage is a plan that meets the Affordable Care Act (ACA) requirements for health coverage.

Read more
https://www.sbmabenefits.com/wp-content/uploads/2020/07/Asian-doctor-is-using-a-stethoscope-listen-to-the-heartbeat-of-the-elderly-patient.-1126835434_2125x1416.jpeg 1414 2121 Amanda Rogers https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png Amanda Rogers2020-08-31 07:00:002022-01-26 14:42:48What is MEC and What Does it Cover?

Are You Liable for Shared Responsibility Payments?

August 10, 2020/in ACA Compliance

With all the recent changes to employment due to the global pandemic, navigating ACA compliance can be challenging. ACA noncompliance may lead to shared responsibility payments. Businesses with 50 or more full-time employees must offer affordable, minimum essential health coverage.

Read more
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What You Need to Know About Penalty A and B Compliance

July 21, 2020/in ACA Compliance, MEC

If you are a business owner and qualify as a “large employer” — any company with 50 or more full-time or full-time equivalent employees (employees who average 30 hours per week) — there a few things you need to know regarding employee coverage. If you don’t comply with the regulations set for you, you will face significant penalties, which can quickly add up.

Read more
https://www.sbmabenefits.com/wp-content/uploads/2020/07/scott-graham-OQMZwNd3ThU-unsplash-2-scaled.jpg 1709 2560 Amanda Rogers https://www.sbmabenefits.com/wp-content/uploads/2021/12/SBMA_Website-Logo_250x150.png Amanda Rogers2020-07-21 14:52:372021-11-29 16:20:01What You Need to Know About Penalty A and B Compliance

Penalty A and Penalty B Compliance

July 21, 2020/in ACA Compliance

Employee benefit programs have been mandatory for all applicable large employers (ALE) since the Affordable Care Act, enacted in 2010. This Act requires employers to offer minimum essential coverage to all employees who work in a company with a staff of 50 or more. Failure to comply with this requirement will cause penalties for these companies and will likely lead to an IRS Audit down the road. Here is more information regarding the importance of Penalty A and Penalty B compliance.

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