The Affordable Care Act (ACA) requires employers with over 50 full-time equivalent (FTE) employees to purchase health plans that meet the new minimum coverage and affordability standards of the law for their employees or pay a penalty. For small businesses with less than 25 FTE workers and average annual wages below $50,000, the ACA offers incentives such as tax breaks and tax credits via the Small Business Health Care Option Program (SHOP) exchange.
The FTEs in a small business determine if it is required to provide a health care plan. Employees working an average of 30 hours per week (130 total monthly hours) are considered full-time. The FTE requirement can raise several questions for employers. For example, seasonal employees who work six months or less will generally not be considered full-time employees. Also hours contributed to tax-exempt organizations are excluded. To determine full-time status for the current year, employers may use a simplified “look back” method that takes into account hours worked by seasonal and part-time employees last year. Assistance on FTEs is available at https://www.healthcare.gov/fte-calculator/.
Companies with 50 or fewer FTEs are not required to provide coverage but must file reports to the government if they offer a health plan. They also need to notify employees that they are required to purchase health insurance privately or through the individual exchange (www. healthcare.gov).
Companies with 50 to 99 FTEs now have until 2016 to comply with the ACA, buying them another year when they will have to start reporting information about their insurance plan. In order to avoid a fine they must cover substantially all (95 percent) full time workers.
Companies with more than 100 FTE employees will need to provide coverage for substantially all their employees in 2015 or pay a penalty as well as report information about their plan.
The SHOP exchange will be open for companies with 50 or fewer FTEs starting November 15th. Beginning in late October, small business owners, agents and brokers will be able to create an account, select a federally facilitated SHOP-certified agent or broker, verify their eligibility and input employee information into the exchange. Employers will not be able to actually shop or compare plan prices until after November 15th. Firms with more than 50 FTEs won't be able to use the exchanges until November 15th, 2015. In the meantime small businesses can apply for the SHOP plans and tax breaks using a paper application. Businesses with 100 or more FTE won't be able to use the SHOP until 2016.
According to Linda A. Hines – ACBC who has worked with small employers over the past twenty years, the options for a small employer to stay within the private marketplace compared to the SHOP, and possibly receive a small employer tax credit, need detailed analysis. Often health plans from the private marketplace offer more benefits, but each situation is different so one must evaluate and compare each offering. Employers should compare the plan’s total cost as well as the employer and employee contributions. The networks may not offer the same plans and the number of plan design choices will be different. A proper cost analysis should be performed to determine which program is the best decision.
If your employee equivalents do not require you to offer a group medical plan, there are still disclosure requirements about the healthcare marketplace that must be given to employees. You also need to ensure COBRA / State Continuation communication materials are updated.
According to Hines, a good consultant should understand all aspects of offering plans, communication requirements, analysis and plan costs. From Pension and Profit Sharing Plans to Group Medical and Individual products, your benefits consultant should be able to create and implement comprehensive packages for your employees that can compete with the large employer market and not break the bank on cost.
By Mary Lou Vande Hey, SCORE Fox Cities Chapter Chair & Linda Hines, principal Member of EBAS, Employee Benefits Administration Services, LLC & Recognized by The National Association of Alternative Benefits (NAABC) as their Compliance Director for Continuing Education.
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