An employer that sponsors an insured health plan (a health plan that provides coverage by purchasing insurance from a health insurance issuer) will not report as a provider of health coverage under Code Section 6055.  The health insurance issuer or carrier is responsible for reporting that health coverage.  However, if the employer is subject to the employer shared responsibility provisions in section 4980H, it is responsible for reporting information under Code Section 6056 about the coverage it offers to its full-time employees.

 

In order to determine your responsibility as a business owner as it relates to health insurance coverage, you should first determine if you are an Applicable Large Employer (ALE).  ALEs are employers with 50 or more employees (including full-time equivalent employees), based on the preceding calendar year.

 

How to determine if you have 50 Employees

 

The count is based on full-time and full-time equivalents employed during the prior calendar year.

 

Definition of Full-time Employee

• Based on each employee’s hours of service
• Is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week
• 130 hours of service in a calendar month is treated as the monthly equivalent
• Hours entitled to payment (vacation, holiday, etc.) are included in hours of service
• Volunteer hours are not included

-First, for each month of the prior year, the employer counts its employees working an average of 30 or more hours per week as full-time employees. If the employer has employees working less than that, add together the number of full-time equivalents (determined by simply adding up the hours that are worked by these less-than-full-time employees for the month, but no more than 120 hours per employee, and then dividing by 120).

 

-Second, the resulting totals for each month in the prior year are added together and then divided by 12 to get an average for the prior year.

Note:  Seasonal Workers – if an employer’s workforce exceeds 50 full-time employees (including full-time equivalent employees) for 120 days or fewer during a calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal workers, the employer is not considered an ALE.

Note:  Common ownership and control “aggregation” rules may apply.  These are similar to rules that have applied to 401(k) and other retirement plans for years. Under these rules, the employees of businesses that are under common control are added together to determine if an employer employs the equivalent of at least 50 full-time employees (including full-time equivalents).

If the result is less than 50 employees, the employer is not subject to Code Section 6055 and 6056 for the current year and need not take any further action.

 

Determining whether the ALE is liable for the Employer Shared Responsibility Payment

 

An Applicable Large Employer will be liable only if:

• The employer does not offer health coverage or offers coverage to fewer than 95% of its full-time employees and the dependents of those employees, and at least one of the full-time employees receives a premium tax credit to help pay for coverage on the Marketplace.

OR

• The employer offers health coverage to all or at least 95% of its full-time employees, but at least one full-time employee received a premium tax credit because the employer did not offer coverage to that employee or because the coverage the employer offered was either unaffordable to the employees or did not provide minimum value.

Definition of Affordable Coverage

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee.

 

Definition of Minimum Value

The IRS has created a minimum value calculator to determine whether the plan provides minimum value.

 

Note: Whether or not one or more of its full-time employees’ dependents enrolls in a Marketplace and receives a premium tax credit does not affect an employer’s liability.

 

Calculating the Employer Shared Responsibility Payment

 

If an Applicable Large Employer owes an Employer Shared Responsibility:

• Employer Shared Responsibility payment is equal to the number of full-time employees the employer employed for the year (minus up to 30) multiplied by $2,000.
• For an employer that offers coverage for some months but not others during the calendar year, the payment is computed separately for each month for which coverage was not offered. The amount of the payment for the month equals the number of full-time employees the employer employed for the month (minus up to 30) multiplied by 1/12 of $2,000.

Note:  If an employer offers health coverage that is affordable and that provides minimum value to its full-time employees and offers health coverage to the dependents of those employees, will it be subject to an Employer Shared Responsibility payment if some of its employees (spouses or dependents) purchase health insurance through a Marketplace or if some of its employees enroll in Medicare or Medicaid?  The answer is No

 

Filing Requirement for ALEs

 

Form 1095-B is filed by the insurance provider.

 

Forms 1094-C and 1095-C are used to determine whether an employer owes a payment under the Employer Shared Responsibility Provision.

 

ALE member must file

• 1095-C for each full-time employee and Form 1094-C transmittal form
• Full-time employee for any month of the calendar year
• For self-insured plans, each employee who enrolls in the self-insurance health coverage or enrolls a family member, regardless of whether the employee is a full-time employee for any month of the calendar year
• Forms must be filed regardless of whether the ALE member offers coverage, or the employee enrolls in any coverage offered
• May file a substitute form, but the substitute must include all of the information required on Form 1094-C and 1095-C

Note:  An ALE is not required to file for an employee who was not full-time in any month of the year.

 

The filing deadline with the IRS is on or before February 28 if filing on paper and March 31 if filing electronically.  Forms 1095-C and 1095-B must be provided to employees by March 2^nd after the end of the year for which the information is being reported.

 

We hope this information has been helpful to you. As an additional source of information, we recommend visiting ADP’s informational site and viewing the solutions they offer.

• Category: Client Alerts, Dental & Health Care
• Tag: employer plan, health insurance, shared responsibility