Employees and their family members eligible for minimum-value employer-sponsored MEC that meets the affordability standard cannot receive premium tax credits or cost-sharing reductions for public exchange coverage. Under the ACA, employer-sponsored minimum essential coverage (MEC) is affordable if an employee’s required contribution for the lowest-cost, self-only option with minimum value does not exceed an annually indexed percentage of the employee’s household income. Once the mandates take effect, it will be more difficult to avoid penalties by making changes at that time.įor more information on the 95% rule, download: Health Care Reform: FAQs on the Employer Shared Responsibility Provisions. Or to view the IRS publication on this issue, visit. It is recommended that you complete this analysis as soon as possible and make the necessary changes to your employment practices now.
Together with your medical insurance broker/consultant, develop a strategy that will mitigate any expected cost increases.Also determine what the penalty would be if no insurance was offered at all. Calculate what penalties, if any, you may be subject too.Take the necessary steps to identify all employees working 30-hours or more based on ACA measuring standards.Even a slight miscalculation could trigger a very large penalty. Caution is advisable on reducing costs by using the 95% rule to expressly exclude coverage for otherwise-eligible full-time employees. The intention of the 95% rule is likely a safeguard in cases of miscalculation by an employer who is otherwise in compliance. Please note that the $3,000 penalty may apply to only the employees who were not offered affordable coverage who qualify for tax-credit or cost-sharing assistance and purchase coverage on the public exchange. purchases coverage from the public insurance exchange.any of the employees whom you do not offer affordable coverage qualifies for a premium tax credit or cost-sharing assistance, and.you offer coverage that is of minimum value but not affordable to 30-hour employees, and.Minor League Penalty: You may be subject to a $3,000 annual per employee penalty if: one or more employees purchase coverage from the public insurance exchange.one or more employees qualify for a premium tax credit or cost-sharing assistance, and.fail to offer coverage of “minimum value”, and.Major League Penalty: You may be subject to a $2,000 annual penalty for every full-time employee (minus the first 30 employees) if : Additionally, while you can intentionally or unintentionally exclude up to 5% based on the 95% rule, your actions cannot be done in a discriminatory fashion. “Substantially all” means at least 95% of full-time employees.įailing to identify full-time employees and offering coverage, or contributing less than the ACA affordability standards may subject your organization to some steep penalties. On Janu(or when your fiscal year plan renews), the ACA mandates that large employers (over 50 full-time equivalent employees) offer affordable, minimum value health coverage to “substantially all” full-time employees or risk paying a penalty. Sometimes the employer offers coverage, but does not contribute toward the premiums. Often these workers are not offered Health Insurance coverage. Many school districts and other local governmental employers have employees working 30 hours or more per week as defined by the Affordable Care Act (ACA).
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