The Affordable Care Act (ACA) is arguably one of the most impactful pieces of legislation in recent years. It not only increased employee healthcare coverage, but it drastically influenced businesses’ operational expenses, including the nation’s 600,000+ restaurants.
Since it was first enacted in 2010, businesses have had to continuously adapt to meet the regulations, or else, face severe penalties and fines.
Here are the most important ACA facts you need to know heading into 2016.
FTE calculations matter
There has been a lot of confusion about how to properly calculate full-time equivalent (FTE) employees. And since FTE status is used as a determining factor for ACA healthcare coverage requirements – more on that below – employers must accurately calculate how many FTE employees they have.
That’s a two-step process.
Step 1: Count the number of full-time employees. Each counts as one FTE.
To be considered a full-time employee, the following criteria must be met:
- Employee must work at least 30 hours per week; or
- Have hours that equal at least 130 hours a month for more than 120 days in a year.
Step 2: Count the number of part-time employees.
Take the total number of hours worked by part-time employees in one week and divide that amount by 30. Add that result to the number found in Step 1.
This is your total FTE status. It’s a critical number used for calculating minimum essential coverage.
Minimum essential coverage
Beginning January 1, 2016, businesses with 50 or more full-time equivalent employees must offer those same employees “minimum essential coverage.”
You can see the IRS’ definition here, but qualifying healthcare plans must meet minimum value and affordability requirements including:
- At least 60% of the total cost of medical services are paid;
- Substantial coverage of inpatient hospital and physician services;
- For the lowest-priced plan covering the employee, their premium must be 9.56% or less of their household income.
Employers who fail to offer minimum essential coverage can expect fines of $2,000 per employee (minus the first 30 full-time employees).
If coverage is provided, but does not meet the minimum value and affordability requirements, the penalty increases to $3,000 per full-time employee receiving a federal subsidy.
Individuals can face penalties too. If an employee doesn’t elect coverage – either through the employer-sponsored plan or another eligible plan – the penalties are:
- $695 per adult; and
- $347.50 per child; or
- * 2.5 % of family income, whichever is greater.
Another ACA component involves filing appropriate documentation with the IRS as well as sending copies to employees.
The documentation is essentially a summary of the healthcare plan coverage that has been provided to each employee in the prior calendar year. So in 2016, employers will report on calendar year 2015.
Two groups must file these documents:
- Employers with 50 or more full- time employees; and
- All self-insured employers, regardless of size.
Statements must be provided to employees by February 1, 2016. The IRS must receive their copies by February 28, 2016 (if mailed), and March 31, 2016 (if filed electronically).
More ACA resources for restauranteurs
These basics are just that – the bare minimum basics. There are a number of other ACA criteria that restaurant owners must meet in order to avoid fines and penalties.
For additional help, please call us at 888-506-0718 or email support@restaurantHRgroup.com.
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Legal Disclaimer: The information I publish is not legal advice but rather is intended to prompt a discussion on best practices in human resources. Further, federal and state laws are amended frequently and vary significantly from jurisdiction to jurisdiction. Therefore, the published information may not be current at the time that you read it or it may not be applicable to your jurisdiction. As such, you should not rely upon any of the published information without first consulting directly with Restaurant HR, legal counsel, and reviewing your local, state, and federal laws as well as any applicable industry practices and company policies.
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