Many employers wonder whether they are required to offer an employee benefits program. There are various federal, state and local laws you should have on your radar when it comes to minimum benefit requirements and reporting. A hint: your company’s size and location have a lot to do with it. Learn about the key requirements of the Affordable Care Act, COBRA and ERISA below.
The Affordable Care Act
If you have 50 or more full and full-time equivalent employees on average during the prior year, you are required by the ACA to offer employee health benefits or pay a tax penalty. Although employers under this threshold are not required to offer employee health benefits, there is an incentive to do so because meeting the following criteria makes you eligible for the Small Business Health Care Tax Credit:
- You have fewer than 25 full-time employees
- Your average employee salary is about $50,000 per year or less
- You pay at least 50% of your full-time employees' health insurance premium costs
According to the ACA Guidelines, a full-time employee works an average of at least 30 hours per week, or 130 hours per month.
Keep in mind, based on the ACA criteria, the hours your non-full-time employees work can add up to equal those of a full-time employee, in which case, a number of non-full-time employees combined together could count as additional full-time employees.
If you have 50 or more full and full-time equivalent employees on average during the prior year, you must follow the Employer Mandate. This regulation within the ACA requires you to either offer minimum value health coverage or pay a fine for each full-time employee. Minimum value coverage is designed to pay at least 60% of the total cost of medical services for a standard population. Benefits include substantial coverage of physician and inpatient hospital services.
Leaders in Washington are working to repeal and replace the ACA. In the meantime, employers should remain compliant with all ACA employee health coverage and annual notification and information reporting obligations. There’s a chance the following pieces of legislation may be addressed by Congress in the coming months:
- The Cadillac Tax, a tax on high-cost employer-sponsored health plans, is set to take effect in 2020. Congress is reviewing bipartisan legislation to repeal the 40 percent excise tax.
- The Employer Mandate, known as the shared-responsibility provision, could also be on the chopping block. Employees seeking full-time work see this as a positive thing because currently, the Employer Mandate causes some employers to hire fewer full-time employees.
- The ACA Definition of a Full-Time Employee is someone who works an average of 30 hours per week. Employer groups are pushing to change the definition to someone who works an average of 40 hours per week (the standard pre-ACA definition).
- Annual Information Reporting - Employers have sought to ease the employee tracking and IRS reporting requirements for employers. To prepare and file Form 1095-C, for instance, involves tracking the hours worked by all employees including variable-hour employees each month, as well as whether coverage was offered and if so, offered affordably.
The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) can be a complex area of federal law. It requires employers with 20 or more employees to provide temporary continuation of group health coverage in certain situations where it would otherwise be terminated. Qualified beneficiaries have an election period of at least 60 days during which each qualified beneficiary may choose whether to elect COBRA coverage.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. ERISA doesn’t require employers to offer plans, but sets standards for those who do. ERISA protects the interests of benefit plan participants (employees) and their beneficiaries by:
- Requiring the disclosure of financial and other information concerning the plan to beneficiaries;
- Establishing standards of conduct for plan fiduciaries;
- Providing for appropriate remedies and access to the federal courts.
At FrankCrum, we can explain which regulations apply to your business and provide the guidance you need to address changes in many areas including health plan requirements and potential penalties.