The New Small Group – 50-100 Employees (Part 2)
In Part 1, we looked at the changes in benefits and how health plans are rated for the New Small Group. In this article we will look at the Play or Pay Employer Mandate in regards to the New Small Group.
The ACA mandates that employers with 50 or more full time equivalent employees (FTEs) MUST offer Minimum Essential Health Insurance Coverage (MEC) to their full time employees. Not only do they have to offer insurance, but the amount that the employee pays toward that insurance must be deemed ‘affordable.’
1. Penalty A
a. This is the penalty for not offering at least 95% of full time employees and their dependents affordable medical insurance that meets the mandated MEC. In 2014, the penalty was $2000 per employee. It was increased to $2080 in 2015 and to $2160 per employee in 2016. Employers are allowed to subtract the first 30 employees from their total employee count. The penalty is then assessed on the remaining number of employees.
2. Penalty B
a. If an employer does not offer affordable insurance or offers insurance that does not meet the MEC standards and has employees that go to the Marketplace and receive subsidized insurance (premium tax credits), then the employer is subject to this penalty. This is a per employee penalty. In 2014 the penalty was $3000 per employee. It was increased in 2015 to $3120, and in 2016 to $3240 per employee.
a. A plan is deemed ‘affordable’ if the employee’s contribution for employee only coverage does not exceed 9.66% of his/her income. This figure is adjusted each year according to inflation.
b. Safe Harbors – There are three different ways to determine ‘affordability’ called Safe Harbors. When an employer chooses a Safe Harbor, the employer must use that same method for all employees.
i. Rate of Pay –The formula for 2016 is 9.66% x (rate of pay) x (130 hours) = Maximum Allowed Monthly Employee Contribution for Employee Only Coverage. The percentage will be adjusted each year for inflation.
ii. Form W-2 – the employer may calculate affordability of coverage solely on the wages paid to the employee as reported in Box 1 of Form W-2.
iii. Federal Poverty Level – If the employee’s contribution for the lowest cost self-only coverage does not exceed 9.66% of the Federal Poverty Level (FPL) for a single individual, then the plan is deemed affordable. In 2016, the FPL for a single individual was $11,880. So this formula would be: $11,880 / 12 x 9.66% = $95.63 = Maximum Employee Monthly Contribution.
In Part 3, we will look at how to determine if you are an Applicable Large Employer and are required to abide by these mandates.
For further information, please contact Pronoeo Insurance Agency at 800-495-2886 or send us an email at [email protected] .