The Affordable Care Act – What You Need to Do By October 1, 2013

There has been much discussion regarding the Affordable Care Act and a lot of misinformationUS Health Logo regarding employer requirements. Whether we agree with it or not, it is now the law and there are requirements and reporting that small businesses are required to do by October 1, 2013.

I have spent some time coming up with the following summary that explains your requirements if you are a small business or non-profit that employs less than 50 full-time equivalent employees (FTE’s) (11 in Massachusetts).

There are two classes of employers – those that employ over 50 FTE’s and those that employ fewer than 50 FTE’s. Those that employ over 50 FTE’s are not required to report until 2015.

This information is for those that employ up to 50 FTE’s. It is applicable to employers covered by the Fair Labor Standards Act which means that if you have at least one employee and at least $500,000 in annual dollar volume of business you are covered by the Act.

The law does not require small employers to provide coverage to their employees but it does require them to provide notice to all current employees by October 1, 2013 and to new employees after that date.

So, if you don’t have to provide coverage you your employees, what do you have to notify them of? Basically you have to advise them that they may be eligible for a premium tax credit if they purchase coverage through the Marketplace and you also have to advise them that if they do purchase through the Marketplace they may lose the employer contribution (if any) to any health benefits plan offered by you, the employer. If you offer health insurance to your employees, you must include a standard “Summary of Benefits and Coverage” form explaining your plan and what it costs.

The Department of Labor has provided employers with two sample notices they may use to comply with the rule – one for employers who do not offer and another for employers who offer a health plan.

I wrote a blog post a while ago discussing the Health Care Credit that employers with less than 25 FTE’s are entitled to. If you employ less than 25 FTE’s with an average salary of less than $50,000 and pay 50% or more of their health insurance you are entitled to a 35% tax credit on your tax return. In 2014 this credit will go up to 50% if you participate in the Small Business Health Options Program (SHOP).

Beginning 2014 all taxpayers must be covered by health insurance or face fines. Most states (including Massachusetts, Rhode Island and Connecticut) have already created health insurance agencies through which taxpayers (including self-employed individuals) can purchase affordable health insurance. There are exemptions from the requirements to obtain minimum essential coverage.

What are the exemptions to purchasing health insurance?

1. Religious conscience. You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits.

2. Health care sharing ministry. You are a member of a recognized health care sharing ministry.

3. Indian tribes. You are a member of a federally recognized Indian tribe.

4. No filing requirement. Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income

5. Short coverage gap. You went without coverage for less than three consecutive months during the year.

6. Hardship. The Health Insurance Marketplace, also known as the Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.

7. Unaffordable coverage options. You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.

8. Incarceration. You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.

9. Not lawfully present. You are not a U.S. citizen, a U.S. national or an alien lawfully present in the U.S.

If you have any questions regarding the law, please feel free to contact me. If you know another business owner that would benefit from this information, pass it along to them, send me their e-mail or have them sign up for my blog.