span to discern whether the employee could be considered full-time. This measurement period should be reevaluated annually. In order to avoid surprise classifications, employers should proactively implement a process this year that will allow for automatic calculation of employee hours during a 3 to 12 month period so that the employer has some idea of what changes may be necessary, and to accurately track employee hours into 2015 and beyond. This is particularly important for employers that do not offer health care coverage to all of their employees who work 30 hours or more each week.
Small Business Health Options Program (“SHOP”) As of January 1, 2014, small business owners with up to 50 employees now have the option of purchasing insurance for their employees through the SHOP. The SHOP was originally intended to be available for employers to select and purchase a plan online from a variety of federally approved plans through Healthcare.gov. However, due to prolonged technical failures, the website is not currently functioning, leaving employers to contact an agent, broker or insurance company directly to compare available SHOP plans and apply for SHOP eligibility. In order to use the SHOP marketplace, an employer must meet certain criteria. First and foremost, the principal address of the company must lie within the state where the employer is buying coverage. Next, the employer must have at least one common-law employee on the payroll (not including the owner, sole proprietor or their spouses) and must employ fewer than 50 full-time equivalent employees. Finally, coverage must be offered to all full-time employees. In Tennessee, once an employer has met eligibility criteria to sign up for a plan on the SHOP Marketplace 50% of eligible employees must enroll in the plan chosen in order for the employer to participate in SHOP. This percentage is lower than what is required in most other states. However, every year between November 15 and December 15, the percentage requirement will not apply in order to allow employers not meeting the minimum participation requirement to offer a SHOP plan.
Small Business Health Care Tax Credit (“Tax Credit”) Small businesses with fewer than 25 employees may also qualify for the Tax Credit. In addition to employing fewer than 25 employees, the employer must also pay 50% of each full-time employee’s premium SHOP health care plan cost. The average paid wage of these employees must be under $50,000 per year. The Tax Credit allows an employer to receive a credit of up to 50% of premiums paid by employers and 35% for tax-exempt employers in 2014. The Tax Credit is advantageous for employers with 10 or fewer employees, where employees’ average salaries are less than $25,000 per employee. If an employer qualifies for the Tax Credit, credit may be applied for two consecutive taxable years. The online SHOP is expected to be up and running by November, 2014. Now is a good time for small employers to evaluate whether they would like to offer health care coverage to their employees in the future, particularly since insurance providers can no longer turn down a company based on an employee’s pre-existing condition nor can providers charge higher premiums for women or employees with higher medical costs.
NOTICES Employers covered by the FLSA are required to provide notice to all new employees of the available health insurance exchanges and the possible qualification for a tax credit or subsidy. There are sample notices available on the Department of Labor’s website for employers that offer health care coverage and employers that do not. It does not matter if the new employee is full-time, part-time or temporary; every new employee must receive a notice. 90-DAY WAITING PERIOD As of January 1, 2014, any employee eligible for the employer’s health plan must begin coverage within 90 days. Employers can no longer specify waiting periods longer than 90 days for coverage to become effective for eligible employees. Eligibility can still be specified by the employer, for example, requiring that employees work at least 3 months, full-time, before becoming eligible. If an employer fails to comply with the new statutory waiting period, the IRS has the authority to impose an excise tax equal to $100 per day of noncompliance. In addition, employers are expected to self-report such violations on IRS Form 8928. HEALTH INSURANCE COVERAGE REPORTING REQUIREMENTS Under the ACA, employer-sponsored group health care plans are required to report the cost of certain types of coverage on IRS Form W-2. The reporting is intended to be for informational purposes only to the IRS and providing the cost information does not cause employer-sponsored health coverage to become taxable to the employee. The IRS decided to make reporting optional for all employers in 2011, and in 2012 decided to make the reporting requirement optional for smaller employers filing fewer than 250 W-2 forms until further guidance is issued. To date, further guidance has not been provided by the IRS, and reporting of employer-sponsored health coverage continues to be optional for smaller employers issuing fewer than 250 W-2 forms. However, small employers should continue to monitor the current reporting requirements, because the IRS will eventually issue further guidance, and the rule will no longer be optional. Beginning in 2015, employers with self-funded plans must begin collecting coverage information for the IRS regardless of the employer’s size. The information that must be provided under section 6055 of the ACA is very similar to the information that large employers of employer-sponsored plans must begin to collect in 2015 as well. The information required includes: the name of each individual enrolled in minimum essential coverage and the name and address of the primary insured or other related person who submits the application for coverage, months of coverage for each individual who is covered under the policy and any other information specified in the forms or instructions. For the large employers with employer-sponsored plans, they must additionally provide the name, address and EIN of the employer maintaining the plan, and whether the employer is enrolled in SHOP. The first of these reports must be filed in 2016. Even though the ACA provides several exceptions for small employers, this does not mean that Tennessee small businesses should act as if the ACA does not apply to them at all. As briefly illustrated above, the Act does provide possible advantages as well as additional requirements for smaller businesses. Being aware of how the ACA may affect your business will help to ensure that the business remains compliant and avoids possible penalties in the future.
Marianne Clendenen, Associate Kiesewetter Law Firm, PLLC mclendenen@kiesewetterfirm.com www.kiesewetterfirm.com www.HRProfessionalsMagazine.com
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