Offering health benefits is a fantastic way to attract and retain employees, showing your dedication to employee well-being while setting your company apart from its competition.
The Affordable Care Act requires larger employers to offer health coverage to at least 95% of full-time employees and children up to 26 years old, or else pay a penalty. But what about smaller businesses?
Employees Over 50
Employers that offer health insurance can help attract and retain top talent. According to a 2016 survey conducted by the Society for Human Resource Management and Aflac, employees overwhelmingly considered health benefits one of the main deciding factors when making their career decision.
But the Affordable Care Act has altered how employers provide health insurance, so it’s vital for small business owners to understand these new regulations.
Under the Affordable Care Act (ACA), employers with 50 or more full-time equivalent employees (ALEs) or their equivalent are considered “applicable large employers”, and must offer affordable health coverage that provides minimum value to their workers. Failing this, an IRS penalty could result in costly fines against these employers.
Determine eligibility for healthcare is an integral component of managing employees, yet can often be confusing and time consuming. Therefore, hiring an administrative or HR team capable of keeping up with Affordable Care Act compliance requirements as well as employee health insurance requirements could prove invaluable in meeting those demands.
Determining eligibility also involves defining full-time employees. Under the Affordable Care Act (ACA), full-time workers are defined as anyone working an average of 30 hours each week or more on average and includes salaried, overtime eligible and hourly employees. There are certain rules surrounding defining full-time status such as using historical data or tracking employees over an entire year.
Notably, the Affordable Care Act (ACA) mandates that employers give each of their employees an SBC form in order to assist with making more informed decisions regarding health insurance options. This form should help employees make more educated choices.
While the Affordable Care Act mandates that only larger employers must offer health insurance, many smaller employers still opt to do so. Offering employee health coverage helps attract and retain top talent; being aware of its complexities helps employers attract top talent more easily; understanding these rules and regulations early can prevent costly penalties in the future for small business owners.
Employees Under 50
At 50 full-time employees or equivalent, employers are legally required to offer health insurance benefits to nonseasonal, part-time and temporary workers. Many small business owners choose to offer benefits prior to this threshold being reached; group health plans tend to offer lower costs than individual/family coverage and employees often appreciate being given quality, affordable health care solutions.
Be mindful of the ACA employee mandate, which mandates employers provide affordable health coverage that complies with health laws to all eligible employees. If one or more of your employees purchases marketplace tax credits in exchanges without your offering affordable health plans to them, an employer shared responsibility payment may be due to the IRS; similarly, this penalty can apply if minimum essential coverage is not offered.
If your company is approaching 50 employees, consulting an HR specialist for guidance is highly advised. In addition to offering health benefits and complying with other Affordable Care Act (ACA) requirements based on company size (such as filing an annual EEO-1 report or providing employee data reports). GenesisHR’s premier PEO can assist with identifying these requirements as well as developing an action plan to achieve compliance.
Employers that offer health benefits must also provide employees with a standard Summary of Benefits and Coverage (SBC), outlining what the plan covers and its associated costs. This must be done electronically if you reach 50 employees as part of an SBC requirement.
Employers are required to issue statements to employees and file an annual information return (Form 1095-C and 1094-C) with the IRS that prove they provided affordable health coverage that complied with regulations. These forms serve as proof that employees received affordable coverage from your business.
Employers with 50 full-time equivalent employees (FTEs or greater), or FTEs, or more are considered large employers and are therefore required to comply with the Family Medical Leave Act (FMLA), offering 12 weeks of unpaid, job-protected leave to eligible employees – this includes those with children as well as spouses or domestic partners.
Employees Under 30
Small companies may not be required to provide health insurance, and many decide not to. But offering coverage may be a key draw for employees; Aflac research shows that 60% of workers would prefer jobs offering lower pay but better benefits.
Under the Affordable Care Act (ACA), large employers are mandated to offer affordable health insurance plans for full-time employees or face penalties. A full-time employee is defined by working 30+ hours each week on average and at least one of an employer’s health plan options must cover dependents (spouses in some states; domestic partners in others; biological children up to age 26 as well as foster and stepchildren up until age 26), without charging more than 9.5 percent of total family income.
Small businesses may take advantage of the Affordable Care Act by employing different methods for measuring employees who work 30 or more hours each week and determining their eligibility for health coverage. They should make sure their benefit documents and any look-back measurement periods clearly define full-time employees as well as eligibility rules for health plans they offer.
Employers that offer health insurance must provide all new hires and their household members with a standard summary of benefits and coverage (SBC), or SBC document, no later than 90 days from when an employee starts work or becomes eligible for company coverage. This document should help employees better understand their benefit options and make informed decisions on which coverage best meets their needs. The SBC should be distributed no later than 90 days from when someone starts or becomes eligible to enroll.
As part of their obligations to employees, companies must allow at least 31 days from an employee’s start date for them to enroll in their health plan through their employer. Special enrollment periods may apply in cases such as marriage or birth; in such instances, employees should receive copies of the SBC along with statements explaining options and potential costs involved with enrollment. Be prepared to answer any queries employees might have regarding their plan or its cost.
Employees Over 30
Employers with 50 FTEs or FTE equivalent employees (FTEs) or more must offer health insurance to all their workers unless they qualify for an hardship exemption. Under the Affordable Care Act (ACA), employers offering coverage must offer at least one minimum value plan that provides minimum coverage to employees working an average of 30 hours each week on average and extends coverage to dependents of those employees (defined as biological or adopted children under 26) including stepchildren, foster children and spouses).
Small businesses aren’t legally required to offer health insurance to employees, but doing so shows you care for them and can help attract and retain top talent. Furthermore, group health insurance costs are usually tax-deductible for small businesses.
Employers with 50 FTEs or less can freely decide whether and what kind of health insurance policy to offer their employees, but larger employers under the Affordable Care Act could face penalties if they do not offer affordable and quality coverage to all of their workers.
To determine whether you’re an ALE, calculate how many hours each of your employees worked during a month on average over an entire year and add that up to determine how many FTEs there are in your business. If there are more than 50 FTEs, the Affordable Care Act mandates healthcare coverage or penalties are owed as per Section 11013.
At the time of hire, employees should also receive a standard form called the Summary of Benefits and Coverage (SBC) so they can understand their options and make more informed decisions regarding any health coverage options they’re considering. The SBC should be updated annually.
No matter your decision on offering health insurance to employees, doing so can be an excellent way to show appreciation for their hard work. According to the Centers for Disease Control (CDC), lost productivity due to personal or family health issues costs US employers an estimated annual total of over $225 billion; when employees are healthy they tend to be more productive and happier with their jobs.