If you are a business owner or work in human relations, listen up! Proposed regulations are out regarding the federal Employer Play or Pay mandate. This mandate will be effective upon your 2014 insurance renewal date. If you do not comply, you may be penalized.
The first thing a company must do is determine if they have 50 or more full-time (FT) equivalent employees – FT employees working 30+ hours plus the number of part-time hours divided by 120. If your organization does have 50+ full-time equivalent employees then the Employer Play or Pay Mandate will apply to you.
If your company does provide health care coverage you will need to determine if the coverage is affordable and if it meets the minimal essential coverage requirements. Groups who do not provide affordable coverage or meet the essential coverage requirements will pay a penalty IF any full-time employee receives federal premium assistance on the Exchange. Coverage must be offered to at least 95 % of your full-time eligible employees and dependent children – but spouses do not have to be included.
Controlled group rules do apply –if you have common ownership in more than one company and all companies have a total of 50+ employees it is possible you will be subject to the Play or Pay Mandate. Please consult your accountant and/or attorney regarding controlled group rules.
A penalty is imposed if coverage is:
Unaffordable – employee pays more than 9.5% of W-2 wages (employee only)
The actuarial value of the employer’s plan is less than 60%, meaning that the plan pays for less than 60% of the covered health care expenses
Does not offer minimum essential benefits – all group medical plans pass; limited benefit plans and AFLAC-type plans do not pass
Employee must receive a subsidy through an exchange in order for penalty to be imposed
Penalty is $3000 for each FT employee getting a subsidy to purchase insurance through an Exchange or $2,000 x (total number of FTs)
If your company does not offer medical benefits or plans to cease offering please keep in mind that you will be asked to substantiate your employee count on a monthly basis. The penalty is paid monthly per employee and the fee is not tax-deductable or used to assist your employees in any way. We recommend you allow us to view your census, determine your risk if you Play or decide to Pay, look at your tax consequences and help you make an informed, educated decision for your employees.
Penalty is $2,000 x (total number of FT employees – the first 30 FTs)
Note: Use Full-time equivalent to determine if the employer is subject to the mandate, but use only FTs to measure the penalties. Although dependents must also be covered to avoid penalty, the penalty is only based per employee – dependents not counted towards penalty.
What happens if employer decides to ignore the penalties?
$100/day “with respect to each individual to whom failure relates”
Maximum for unintentional failure is the lesser of: 10% of the total-spend of the group health plan for preceding year; or $500,000
The employer is not liable if the employee refuses the coverage offered. Individuals are required to obtain health insurance unless the income is below the federal poverty level or due to religious objections but the employer is not responsible for making sure the employee has insurance. They just need to provide affordable, essential benefits to avoid the penalties.
Does all of this make your head spin? We are here to help. Talk to your advisor at ANBTX Insurance about strategies for 2014.