Here are some of the important factors related to the ACA Employer mandate 2019:
Who needs to comply – The ACA Employer Mandate applies to all the Applicable Large Employers or ALEs, which includes any organisation that has 50 full time employees or the equivalent of the same. If there are several affiliates to one company or several outfits are controlled/owned by one employer, then too they would come under the mandate.
What needs to be done for compliance – Employers, specifically ALEs need to comply with two different rules – the ACA Coverage Mandate and the IRS Reporting Requirements. Under the ACA Coverage Mandate, employers need to offer a health insurance to all their full time employees, and this is generally done on a monthly basis. The nature of the insurance can vary from organisation to organisation, but if the insurance is not offered/provided, there is a penalty. An important to note here is that the affordability threshold percentage for the 2019 filing year has gone down to 9.86%.
Moving onto the IRS Reporting Requirements – at the end of each financial year, the employers need to prove that they offered the right health insurance to their employees and that too at the right time. The employers need to provide every full time employee with a form 1095-C by January 31st, 2020. IRS needs to be provided with copies of the 1095-Cs as well as 1094-C. All the paper filing needs to be done by February 28th, 2020 and electronic filing (which will be required if the employer has more than 250 1095-Cs) has to be completed by March 31st, 2020. An important point to remember is that since the 2018 filing year, IRS will not be processing any of the individual tax returns, unless the individual taxpayers do not indicate the type of health coverage they have.
What about the associated penalties – If there is any non-compliance, there will be penalties – employers need to comply, on time and with all the proper documentation. Failure to meet even one of these said requirements could lead to severe penalties. The penalties have gone up in 2019 – it now stands at $2500 annually for each full time employee, but the first 30 full time employees are not counted. And in case the full time employee receives a tax credit, the penalty will be higher at $3750, each year.
There are those who feel that IRS will not be enforcing these penalties, but the fact is that IRS has made it very clear that it will not be waiving off any penalties. If there is a penalty being imposed, the employers will be sent a 226J letter and it is imperative that the reply be sent within 30 days.
What do employers need to do now: In the 2019 filing year, employers have to manage a detailed list of the full time employees and their eligibility, throughout the calendar year and ensure that the forms 1094-C and 1095-C were completed and submitted well within the allotted time. For the filing year 2020, the employers will need to continue doing the same, but there are two important changes that will come into play in 2020:
- The Cadillac tax has been put on hold till 2022, because this has been an unpopular tax. As per this tax, there would have been a 40% tax on the total value of the coverage over specified thresholds. However, employers will need to keep in mind the effects of this tax, when it does come into effect.
- The Health Insurer Tax has been suspended for the 2019 financial year – this was a tax that was levied on health insurers on the basis of the premiums they collected and in most cases, this amount would be transferred to the customers. This tax was suspended in 2017, returned in 2018 and has been suspended again in 2019 and there are no clear indications as to what will happen in 2020.
Frequently Asked Questions by Employers
What if I’m Self-Employed?
If you’re self-employed with no employees, you’re not considered an employer. For complete details, please visit HealthCare.gov or click here.
What if I Have Fewer than 25 Employees?
Businesses with fewer than 50 full time equivalent employees are exempt from penalties; however, you may qualify for employer health care tax credits. For complete details, please visit HealthCare.gov or click here.
What if I have Fewer than 50 Employees?
Businesses with fewer than 50 full time equivalent employees are exempt from penalties (also known as the Employer Shared Responsibility Payment or “Play or Pay” penalty) faced by larger employers that do not offer coverage. However, employers who are close to reaching 50 full time equivalents are encouraged to closely monitor their workforce, as reaching the threshold and not offering health care coverage can result in steep penalties. For complete details, please visit HealthCare.gov.
What if my business has 50 or more employees?
Many important parts of the health care law apply to businesses with more than 50 full time equivalent employees. Under the health care law, employers with 50 or more full time equivalents are considered “large businesses” and therefore required to offer employee health care coverage, or pay a penalty. Large employers will also be required to comply with a second mandate, which is to report to the IRS on the employee health coverage offered or not offered. Initial reports will be due by January 31, 2016, for the 2015 tax year. For complete details, please visit HealthCare.gov.
References for ACA Employer Mandate 2019