3. ACA Definition of Full Time Equivalent Employees
for Large Employers
• Full Time Employee: Anyone working 30 hours a week or more for a
majority of 2013.
• Full Time Equivalent Employee: Take all full time employees and ADD
part time employees’ total hours divided by a factor of 120 to get the
number of Full Time Equivalent Employees. If an employer has 50+ full
time equivalents then they are defined as a Large Employer.
• WARNING: It is possible to have fewer than 50 full time employees but
have over 50 full time equivalent employees and be defined a Large
Employer!
• It’s all in the math!
4. PLAY or PAY for
Employers with 50+FTE’s
PLAY = Employer offers group health
insurance that:
o Meets the Affordability Test, and also
o Meets the Essential Benefits Test
AND: Monthly track all eligible
employees and enroll them into the
group health insurance or keep their
waiver on file.
KEY: Track and manage all employee data
monthly to consistently pass ALL tests
PAY=Employer does not offer a group medical
plan, and
o Any full time employee gets an
individual health plan with a state
provided premium tax credit.
o Penalties apply if the Employer’s plan
fails the Affordability or Essential
Benefit Tests and one employee gets a
premium tax credit when they enroll
onto a state exchange health plan.
5. Penalties
Penalties occur in the following situations:
1. Large Employer does not offer group health insurance, and a full time employee goes to the
state exchange, qualifies for a premium tax credit, and enrolls into a health plan.
• Penalty is $167 per full time employee per month after the first 30 full time employees.
2. Employer group medical plan fails the Affordability Test or the Essential Benefits Test.
Penalty is $250 per full time employee per month after the first 30 full time employees.
3. Employer fails to add an eligible employee to their group medical plan
• Penalty is $250 per full time employee per month after the first 30 full time employees.
Only one of the above penalties applies per Employer.
6. Employer (50+) Fine
for Not Offering Coverage
• Not a complicated calculation
• Minimum thresholds must be met before
payment occurs
Penalty Calculation
o # Employees ___
o Minus 30 ___
o Multiply by $166.67 ___
o Penalty $____
Perform this calculation for each month
of
the year that coverage was not offered
and total or the annual penalty
7. Math For Employer Penalties
Standard Calculation
• Number of full time EEs that mo. = ____
• Minus 30 = ____
• Multiplied by $166.67 = $____
• Perform this calculation for each month of the year
that any full time employee got a premium credit
from an exchange and add all the monthly results
for the annual penalty
• Annual fine of all months after calculating
variations = $______
• NOTE: Assumes the same employees and coverage
each month throughout the year
Second Exchange Based Calculation
Number of full time EEs who receive a
premium credit through the exchange = _____
Multiply by $250 per exchange employee = $____
(Perform this calculation for each month of the year that any
EE got a premium credit from an exchange and add all
the monthly results to get the total annual penalty)
Annual fine of all months after calculating = $____
Compare totals for both calculations,
and use the lesser amount as the penalty $______
(Both calculations done when group health coverage is offered but not unaffordable or essential benefits not offered and EE
gets exchange premium credit)
8. What Data Do I Need to Track?
For ALL Employees
• Gross W2 Wages
• Hours worked
• Employee’s share of premium for group medical
• Hire dates
• Waiting period for benefits
• Plan benefit summaries
• Value of benefits
9. ACA Accounting and Compliance Advisors, LLC
Large Employer Services
• Step One: The Executive Summary.
o This report provides a solid situational analysis of how your Company complies with
ACA requirements. The report includes a summary of the three key tests and your
business, identifies potential risk areas, performs the penalty math, has a yellow flag
feature for potential trouble areas, and comes with supporting documents.
• Step Two: Full ACA Compliance Support
o ACA Required Monthly Employer Accounting
o ACA Employer Penalty Analysis
o Monthly FTE Data Collection
o Full Time Benefits Affordability Testing Report
o ACA Employee Communications
o Benefits and Pricing Analysis
o Part Time Employee Education Program:
o Health Plan Finder: Individual Mandate and Enrollment Service into Exchange or
Private Plans
10. Contact Us-Engagement Letter
• Contact us for more information on how to get started with the Executive Summary. We
do require an Engagement Letter.
o Phone 855-862-1600
o Email admin@aca4employers.com
• Call or email us for Executive Summary Rates
o The cost of the Executive Summary will be applied to offset the cost of the monthly
Full ACA Compliance Support.
Editor's Notes
ACA Accounting and Compliance Advisors, LLC guides Employers through the Affordable Care Act rules and regulations, providing comprehensive services to manage the new data reporting responsibilities required by the Act.
Beginning 2014, the Affordable Care Act or ACA, will impact ALL businesses and ALL individuals. The purpose of this presentation is to provide an overview of ACA requirements for large employer groups and offer solutions to manage the ACA’s complex requirements. On January 1 2014, two mandated provisions of the ACA law go into effect. The first provision is termed “the individual mandate,” whereby all persons must have health insurance. Any person without health insurance will have to pay a penalty or a tax of $95 per family member for the year or 1% of household income which ever is lower. The tax penalty increases significantly in 2015 and again in 2016. The second mandated provision is termed “PLAY or PAY,” whereby large employers must offer qualified health insurance to their employees or pay penalties. This “Play or Pay” provision only effects Large Employers. Determining if your company meets the ACA’s definition of a large employer can be confusing. In 2013, if your company has 50 or more full time equivalent employees, then your company meets the larger employer status. Part time employee hours also contribute to the count for full time equivalents. Beginning January 1, 2014, all large employers must comply with the PLAY or PAY mandate. The Play or Pay mandate does not apply to small employers. Small employers do not have to offer group health benefits and small employers with less than 50 full time equivalent employees pay no penalties.
ACA has defined a full time employee as anyone working 30 hours a week or more. Many employers define employees eligible for benefits different from 30 hours a week. But ACA’s rules are the law, therefore 30 hours or more per week is counted as a full time employee. Calculating Full Time Equivalents includes both full time employees and part time employee hours worked. All part time hours worked for the week are divided by a factor of 120 to give the number of full time equivalents. An employer with 30 employees working 30 or more hours has 30 full time equivalent employees. If the same employer also has 50 part employees who are working substantial hours, this employer can be considered a large employer. Remember only full time employees working 30+ hours weekly qualify for group health insurance. Employees not eligible for the group health plan, such as part timers and dependents of ALL employees, they can use our Health Plan Finder booklet which explains how they can shop and find the best health insurance plan from all available options.
Per ACA guidelines, beginning January 1, 2014, once a company is defined as a large employer, the employer must abide by the “Play or Pay” rules. “Play” means the employer must meet ACA data collection and reporting guidelines and offer an ACA compliant group health plan. Unfortunately, offering a group health insurance plan is not enough to avoid paying penalties. To avoid “Pay” penalties, every month, the employer’s group health insurance plan must meet the Affordability test and offer eligible employees group health insurance when they become eligible. For all large employers, ACA mandates that 2013 is the baseline period, termed “the Standard Period.” To determine compliance in 2014, the full time employee data used to develop the baseline is 2013 data. Thus, 2013 employee data is applied to 2014 as the guide for meeting the two tests. Actual real time employee eligibility will be tracked closely. Employers will be responsible that their eligible employees are offered affordable health insurance that includes all the Essential Benefits.
In three situations penalties apply to large employers. When the Employer offers no group medical plan. When the group health plan is offered but the health plan does not pass the Affordability Test. Failure to meet the Affordability Test occurs when the Employer’s contribution to the employee’s premium is not enough according to the guidelines of the ACA. On the other hand, passing the Affordability Test blocks Employer penalty exposure. Penalties can arise in the case where a full time employee does not pass the Affordability test and they enroll in a health plan from the individual exchange and qualify for premium tax credits. The affordability test must be monitored to avoid this penalty potential. When the large employer’s group health plan fails the Essential Benefits test. The penalty reverts back to all employees, the first 30 employees are excluded from the penalty calculation.. Even if the Large Employer offers group health insurance to full time employees, penalties can occur if the health plan fails either the Affordability or Essential Benefits Tests, or an eligible employee is not offered group health insurance. Only one penalty will apply. Penalties are not tax deductible but premiums fro group health are a deductible business expense.
Large employers that do not offer group health insurance will pay a penalty. This penalty is not a valid business deduction and may be slightly more costly than offering group health for employees, especially since insurance premiums remain a valid business expense deduction. The penalty calculation is not complicated. Penalties are based on the number of Full Time Equivalent employees (FTE’s) minus 30 times $166.67 monthly. For example, a company with 80 employees will pay penalties of $8,333.50 per month or $100,002 per year. The math is 80 employees minus 30 equals 50 employees times $166.67 which equals $8, 333.50. Annualized, the penalty is $100,002. A large group health insurance premium for 80 employees could be approximately $12,000 a month or $144,000 a year. With a tax deduction of 30% for the premium, the annualized premium cost is $100, 800. Thus, the cost of the group health insurance is close to the penalty amount.
The left chart outlines the penalty calculation when an employer does not offer health insurance coverage. This is the same penalty calculation as in the previous slide. The right chart is the penalty calculation when an employer offers health insurance coverage, but the coverage does not pass the Affordability and/or Essential benefit Test. The employer pays the lesser of the two penalties. Employers will pay a penalty even if the employer offers group medical insurance, but some of the employees do not subscribe to the group health insurance plan due to Employer failure to offer enrollment.. The reason the employees opt out of the group health insurance plan could be the employees must contribute to the cost of their health insurance and these employees feel their premium contribution is too high. If employees go to the state’s insurance exchange for their health insurance, this will trigger more penalties for the employer.
The ACA requires all businesses with 50 or more full time equivalent employees to track employee data on a monthly basis and be able to report monthly, but actual reporting will more than likely be on an annual basis. The required reporting data includes: Gross wages before deductions Hours worked for all employees Employees’ hire date Waiting periods to determine when the employee is eligible for benefits. Employers have several new responsibilities under the ACA such as they must complete benefit summaries for all medical plans offered employees and provide a notice of benefit changes 60 days prior to open enrollment. The value of the employee’s benefits will soon be required to be reported on W2s. The value is going to relate to the actuarial value of the benefit and not the premium alone. The employee’s contribution to the monthly health insurance premium which is used to calculate the Affordability Test. The ACA sets 9.5 % of gross wages as an employee’s maximum premium contribution. The 9.5% of gross wages is safe harbor guide for the maximum amount an employee can pay toward their health premium and still pass the Affordability Test.
ACA Compliance and Accounting Advisors, LLC helps large employers track employee data, analyze the data to make sure they are in compliance and avoid penalties. Our services include two steps: Step One-The ACA Executive Summary. This summary comes with a comprehensive report that includes your full time equivalent base estimate; an analysis of your current medical plan in terms of Essential Benefits, an employee Affordability summary with an estimate of your Employer penalty. And most important, a summary of your penalties if you do nothing and an outline on how to stay compliant and penalty free. Step Two- The Full ACA Compliance Support. This compliance and accounting service includes ACA monthly employee data collection; Full Time benefits affordability testing and eligibility tracking; ACA penalty protection; all ACA required employer accounting and reports, ACA required employee communications; Benefits and Pricing Analysis, and onsite part time employee and dependent Health Plan Finder support.
To get started, please email or call us for an Engagement Letter. Once you complete an Engagement Letter, we will discuss with you your questions about the Executive Summary and outline the cost of the Executive Summary Report and the data we need to get started on your Executive Summary Report. Our phone number is 855-862-1600 Email is admin@ACA4Employers.com Thank you.
