Updated December 11, 2020
Repeal ACA, replace ACA, repair ACA or just leave it alone? While the lawmakers debate, employers are left with a lot of confusion. As of right now, the ACA, including the employer mandate, remains in place and all the compliance rules still apply.
Nearing year-end and your 2020 tax reporting, this would be a good time to run through the specifics of the employer mandate, how it works and who is bound by it.
This is part 1 of a 2-part article. Part 1 discusses the who, when and how of compliance. Once we’re all clear on compliance, Part 2 will discuss the penalties associated with failure to do so.
ACA Compliance: Who must comply
The ACA Employer Mandate applies to all Applicable Large Employers or ALEs. The act defines ALEs as US employers having 50 or more full-time employees (or equivalents) in the previous tax year. Companies that are affiliates or are commonly controlled are treated as one employer for the purpose of determining ALE status. That means that they must combine their numbers for the full-time employee total.
Learn more by watching our video: Does Your Business have to comply with the ACA?
ACA Compliance: What do you need to do to comply and when do you need to do it?
Employers face 2 levels of ACA compliance. They must comply with the ACA Coverage Mandate and they must comply with IRS Reporting Requirements.
1) Compliance with the Coverage Mandate
Under the ACA, employers must periodically (usually monthly) offer a certain quality health insurance to full-time employees or risk paying a penalty.
Qualifying plans must offer:
- Minimum Essential Coverage (MEC)
- Minimum Value (MV): the plan must pay at least 60% of the costs of benefits
- Affordable Coverage: A plan is considered affordable if the employee’s required contribution does not exceed 9.78% (this amount is adjusted annually based on the federal poverty line %)
Each of these requirements has its own intricacies, so it’s best to consult with a knowledgeable insurance broker before choosing a plan for your company. They will be able to tell you if the plan meets MEC and MV standards.