It is important that employers make sure they are aware of the distinction between a small employer and a large employer when it comes to the health care laws and other tax provisions. According to the Affordable Care Act (“ACA”), companies that have 50 or more full-time or full-time equivalent employees are considered Applicable Large Employers (“ALEs”). As an ALE, companies are subject to the employer shared responsibility provision, which requires employers to offer minimum essential coverage that is “affordable” and provides “minimum value” to their full-time employees and their dependents, or face a possible penalty by the IRS. Along with offering health coverage that meets ACA requirements, ALEs are responsible for furnishing Form 1095-C to employees and e-filing these forms with the IRS. Form 1095-C, which is entitled, “Employer-Provided Health Insurance Offer and Coverage,” indicates the months employees were offered affordable, minimum value health insurance during the year. ALEs are also required to file Form 1094-C, “Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns,” with the IRS. The reporting requirement is necessary to determine if an employee is eligible to claim the Premium Tax Credit, offered pursuant to the ACA, for any months during the calendar year.
To determine if your company is an ALE for the current tax reporting year, an employer would add its total number of full-time employees (someone who works 30 or more hours a week) for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divide that total number by 12. Full-time equivalent employees are calculated by adding all the part-time employees’ hours for the month divided by 120. If the number of full-time AND full-time equivalent employees is over 50, the employer must offer health coverage to their employees and fulfill this reporting obligation. If a company has affiliates with common ownership, the consolidated employer group is treated as a single employer for determining ALE status and thus, the employee counts of FT and FTEs employees should be combined.
If an employer is not considered an ALE and has fewer than 25 employees, it may be eligible for a Small Business Health Care Tax Credit (“SBHCTC”), which could offer a savings of 50% off the costs it pays for its employees’ premiums. To be eligible for the SBHCTC, an employer needs to meet the following criteria:
– Purchase coverage through the Small Business Health Options Program (SHOP) Marketplace
– Pay average wages of less than $50,000 a year per full-time equivalent, adjusted for inflation.
– Pay at least 50% of the qualified employees’ health care premiums
It is important to note that the employer mandated reporting requirements under the ACA apply to any self-insured company, regardless of size. The annual reporting requirement for self-insured companies include the disclosure of health coverage for their employees and dependents. Self-insured employers that are not ALEs need to complete Forms 1095-B and the transmittal Form 1094-B to meet the ACA reporting requirements. If an employer is an ALE and self-insured, they need to report health coverage information as required by fully-insured companies. In addition, they also need to complete information on the health coverage for their dependents in Part III of the 1095-C Form.
For more information on ACA reporting requirements depending on the size of your company please visit the IRS website.
Sound complicated? It is! Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs.
To learn more about ACA compliance, click here.We are here to help! Please contact SPS/GZ with any questions you may have about ACA reporting. firstname.lastname@example.org.