Employee Benefits... General ACA Affordability...
ACA Affordability and Employer Mandate Updates
ACA Affordability and Employer Mandate Updates
As you may already be aware, the Affordability guidelines and Employer Mandates of the ACA apply to employers that, on average, employed 50 or more full time employees (including full time equivalents) during the preceding calendar year.  If this describes your organization, you may recall that in December 2015 the IRS finally gave us the adjusted figures to use in calculating affordability and the employer penalty. This IRS ruling is Notice 2015-87. This notice also covers some other clarifications but for the purpose of this article we’ll just discuss Affordability and the Employer Mandate.
We have all heard from the beginning of the ACA that if the employee share for lowest cost single coverage is more than 9.5% of box 1 W2 income, the offer is unaffordable and the employer could be responsible for an employer mandate penalty. The December IRS notice increased the affordability percent to 9.56% for 2015 and 9.66% for 2016. Let me reiterate, the affordability is based on the employees box 1 income on their W2.  You may still hear people mention 9.5% when discussing the law, and that’s fine. You can still base employee cost share on 9.5% if you want. These updated amounts also apply to the affordability safe harbors, if you are using one. These would be the rate of pay, W2, and federal poverty level safe harbors.
Before we celebrate the IRS giving us a fraction of a percent in Affordability, we should remember that the employer mandate penalties have also been adjusted for 2015 and 2016. The initial penalties were $2000 for not providing coverage, and $3000 for those that provide coverage that is not affordable and/or does not provide minimum value. These amounts were for 2014, and never really applied to anyone. No one was subject to penalties in 2014. For those that may be subject to penalties in 2015, the penalty for not providing coverage will now be $2,080 and for those that provide coverage but it is not affordable and/or does not provide minimum value the penalty will be $3,120. For 2016 these penalties will be $2,160 and $3,240 respectively. These penalties are assessed monthly, so if you are notified by the IRS that a penalty is due it will only be for the months until the employer corrects what is needed to no longer be subject to the employer mandate penalty.  I must point out however that it will probably take a couple of years for the IRS to get up to speed with auditing employers, so that monthly penalty will probably be for 24 months or so. With that in mind, delaying compliance may end up being a costly mistake.
The ACA is a complicated set of laws, with a myriad of details.  This article focused on just two components, hopefully making them a little more manageable. As always if you have any questions on this article, or other aspects of the ACA, feel free to contact me. 

Pat Kelly
Healthcare Reform Compliance Director, Account Executive
Hausmann-Johnson Insurance

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