While the Patient Protection and Affordable Care Act stands to vastly improve America’s healthcare system, it does have substantial impacts for employers. In a nutshell, it’s going to require anyone who employs more than 50 people full time to offer those employees health care insurance that meets a minimum standard of value. How much these new requirements are going to cost will vary depending on your operation and how the regulatory process ends up defining ‘affordable minimum value’ – a discussion which is still in deliberation.
Some experts feel that serviced-based industries such as restaurants may feel the impacts of these new regulations more acutely than non-service sectors, and as such, it’s important to understand the details of the coming reforms.
How to Determine if Your Business Will be Subject to the Employer Mandate
If your business employs more than 50 people full time, in this instance defined as those who average at least 30 hours a week per month, you will be subject to the healthcare mandate. You will not be required to offer health care benefits to part-time employees; however, the number of part-time employees that you have does factor into the determination of whether or not you meet the 50 full-time employee threshold. The following formula determines whether or not you meet that threshold, and will be calculated on a monthly basis:
The number of full time employees you have + the total number of hours worked by part-time employees for that month, divided by 120 hours = the number of full time equivalents.
What if I Own More than one Restaurant Company? Are They Considered Separately?
If you own more than one restaurant, you need to get together with your tax advisor to determine whether or not you are considered a single employer as defined by the ‘common control’ clause in the tax code. If you are considered a single employer, all of your full time employees in all of your restaurants will be combined together to calculate whether or not you meet the 50 full-time equivalent threshold.
Do I Have a Choice in this Matter? How Much am I Going to have to Pay and what kind of Penalties are There?
Employers subject to the employer mandate can choose not to offer coverage to their full-time employees. However, if you go this route and even one of your employees uses a premium tax credit to access coverage on the insurance exchange, you will be subject to paying a penalty of $2000 per full-time employee annually.
You can also be penalized if the insurance plan that your company offers is not considered affordable. If the amount of your employee’s contribution is greater than 9.5 percent of their annual household income and they apply for coverage on the exchange using a premium tax credit, you can be subject to penalization in the amount of $3,000 per full-time employee. The IRS and the exchange for each state will verify the household income of your employee based on their tax filings.
If you do choose to offer health care coverage to your full-time employees, you can expect to provide affordable coverage of minimum value with at least 60 percent actuarial value in order to meet the requirements dictated by the reform. You will have 90 days from the time of hire to offer new full-time employees their health care coverage.
All in all there’s a lot to know about the changes coming, and although the law doesn’t go into effect until 2014, several of the reporting requirements are coming due by the end of 2012 and the beginning of 2013. See the following blog for more information about action steps you need to take now to ready your business for the reforms.
Jim Balis' Blog 