Do I have to offer insurance?
For 2015, if you have more than 100 full time equivalent employees (FTEs), then you’re required to comply with the law. We’re in the process of notifying all of our payroll clients who had more than 100 FTEs as of July 31, 2014.
Under certain circumstances, you may qualify for some transition relief during 2015 – talk with your accountant regarding your specific situation.
Can I discriminate by offering different kinds of insurance to different groups of my employees?
Yes, if your insurance plan is fully insured, you can discriminate in 2015. If you’re self-insured, the discrimination rules apply as in the past, which generally does not allow you to discriminate as to eligibility or benefits in favor of your “highly compensated employees”.
Which safe harbor should I use for calculating premium contributions by employees – what are the advantages of one over another?
First off, remember that you only have to subsidize the Bronze level coverage for a single employee. You have to offer dependent coverage, but you don’t have to subsidize those premiums.
Health insurance is considered affordable if the employee’s share of the premium does not exceed 9.5% of the employee’s household income. So if an employee makes $25,000 a year, the maximum amount they would pay for insurance premiums is $2,375 (or $197.91/month). If the premium for a single employee (Bronze coverage) is $245.88/month, they would pay $197.91 and the employer would pay $47.97.
Most employers are not going to know an employee’s household income, so there are three safe harbors for collecting premiums from employees:
1) You can deduct 9.5% of the employee’s wages each payday (obviously not to exceed the cost of the premium). This means that if the employee’s pay fluctuates each payday, so will the amount of their contribution, but this method will likely net the largest contribution from employees.
2) You can deduct a flat rate of pay not to exceed 9.5% of their monthly wages, which produces a consistent deduction each payday, but will likely result in a smaller contribution from the employee. This is calculated by taking the employee’s hourly rate x 130 hours or is based on a salaried employee’s monthly wage. An advantage to this method is that the contribution is not limited if an employee’s pay is particularly low or nonexistent for a particular pay period. If an employee goes on vacation for most of a pay period, they will owe you the flat contribution when they return to work.
3) You can deduct not more than 9.5% of the Federal Poverty Line for a single individual. This method will produce the smallest contribution by the employee, but has the same safety net for the employer, where the employee will owe you the flat contribution when they return to work.
Be sure to update your employee handbook to state the time period in which the employee needs to make up the missed deductions before their insurance coverage is cancelled. If an employee goes on an extended leave but desires to continue their coverage, they will need to make arrangements to make up those contributions during their absence.
When will I get a notice if one of my employees goes to the Exchange? How much time do I have to respond?
Notices are delivered by US mail when an employee is certified to receive a subsidy on the Exchange or a premium tax credit. You should respond as soon as you can, but within 90 days of the notice.
If you still have questions, we’re here to help! Please contact us to discuss your situation.