Although the Patient Protection and Affordable Care Act was signed into law by President Barack Obama in March 2010, businesses required to provide coverage to their employees didn't have to start reporting until 2015. Under the ACA, companies with 50 or more full-time equivalent workers had to offer minimum essential coverage that met affordability standards set out by the legislation.
This employer-sponsored insurance requirement is known as the Employer Mandate. Let's take a closer look:
A notice from the Treasury Inspector General
On April 7, the Treasury Inspector General for Tax Administration sent out a report sharing the creation of the ACA Compliance Validation System. The tool will be used to find, notify and calculate the penalties for non-compliant ALEs that failed to offer minimum essential coverage to their employees.
Since no fines have been collected since the 2015 reporting year, it was common for companies to think the IRS would not be enforcing the Employer Mandate, according to The ACA Times. TIGTA's correspondence regarding the ACV solution, however, claims otherwise. The report states that the implementation of the ACV system will now take place in May 2017 – with a final date still to be decided. Once this software is set up, non-compliant ALEs will begin to receive penalty notices.
"The Employer Mandate applies to companies with 50 or more full-time employees."
The ACA came with a number of requirements for organizations and employees alike. The Individual Mandate made it mandatory for every U.S. citizen to be insured, whether it was provided by the organization they worked for or purchased on the ACA marketplace. The Employer Mandate, on the other hand, obligated businesses with 50 or more employees – known as applicable large employers (ALEs) – to offer their workers healthcare.
The latter obligation was implemented in waves. The final iteration called for these companies to provide minimum essential coverage to at least 95 percent of their full-time workforce by 2016. In order for that insurance to be deemed affordable under the ACA, it must pay for at least 60 percent of covered costs for a standard population – also known as minimum value – and not cost employees more than 9.69 percent of their household income, according to the Kaiser Family Foundation.
The Obama administration's healthcare legislation included fines for companies and individuals that didn't meet the ACA's requirements, according to the IRS. ALEs that didn't provide coverage at all are subject to a $2,260 penalty, which is divided by 12 times the number of full-time employees, and paid on a monthly basis as long as they don't adhere to the requirement.
ALEs that provide insurance that does not meet minimum value obligations and is deemed unaffordable must pay a monthly fine of $3,390 divided by 12. This penalty must be paid for each employee that receives a monthly premium tax credit for purchasing coverage off the healthcare exchange. The maximum on this fine is $2,260, divided by 12 times the number of full-time employees.
Next steps for employers
Companies do not have the ability to change their reports for the 2015 and 2016 filings. If they didn't adhere to the employer mandate, businesses could begin calculating their potential fines using the IRS penalty information previously stated.
Now that ALEs know the IRS is committed to enforcing this requirement moving forward, they should be cognizant to comply with all ACA obligations. With a possible new form of healthcare on the horizon, it's crucial for HR and benefits teams to remain updated on legislative news and changes that will affect their employee offerings.