The Affordable Care Act requires reporting the cost of healthcare coverage through an employer's group plan on the W-2s of employees, however does not make the coverage taxable. A transition relief for reporting continues to be in place for eligible employers, including those filing fewer than 250 Forms W-2 for the previous calendar year. The transition relief continues until the IRS publishes additional guidance.

For more information, including a complete list of transition relief eligibilty requirements for employers, visit Employer-Provided Health Coverage Informational Reporting Requirements: Questions and Answers on the IRS.

Tracking employee hours became more essential than ever due to the Affordable Care Act (ACA). Employees working over 30-hours per week or 130-hours per month will qualify for employer-sponsored “affordable” healthcare. Subsequently, failure to properly track employee hours can result in tax penalties/payments or disqualify a business for available tax credits. Employers must validate full-time and full-time equivalent employee counts and employee hours (weekly or monthly) to the IRS. Implementing automated time and attendance systems protects employers and should be put into place immediately (if not already in use). Time and attendance systems offered by HowardSimon can be implemented through the web, or a combination of physical clocks, voice clocks, swipe cards, biometric verification and web access.

Important Considerations for Small Businesses:

• Employers with fewer than 50 employees are exempt from new employer responsibility policies, meaning they will not have to pay an assessment if their employees get tax credits through an exchange. A premium tax credit will be available to help individuals or families to afford health coverage purchased through the exchange.
• A small business may qualify for a tax credit of up to 50% (up to 35% for non-profits) to reduce insurance costs. In order to qualify, the business must have fewer than 25 employees.
• The Early Retiree Reinsurance Program offers financial assistance to employer-based plans that provide health insurance to retirees ages 55-64, with the objective of lowering the cost of premiums for all employees and reducing employer health costs.

Small Businesses Health Options Program (SHOP)

Beginning in 2014, the new health insurance marketplace becomes available to small businesses with fewer than 50 employees through the Small Business Health Options Program (SHOP). To reduce the high administrative costs that small businesses incur with health insurance, the SHOP marketplace offers quality coverage at a lower cost than currently available. The SHOP program aims to simplify finding healthcare for small businesses. Eligible employers must offer SHOP coverage to all full-time employees and have an office located in the service area of the SHOP in order to enroll.

Details on the Small Business Health Options Program (SHOP):

• Control Over the Level of Coverage: Employers will decide on the level of coverage offered and define their contribution towards employees’ coverage.
• Access to Tax Benefits: In addition to the Small Business Healthcare Tax Credit covering as much as 50% of eligible employer contribution towards premium costs, other tax breaks become available when insurance is obtained through the SHOP.
• New Consumer Protections: New limits protect businesses with older employees from being charged higher premiums. Group premiums no longer increase with a high healthcare cost employee. Profits and administrative costs incurred by insurers’ will also be restricted.
• Private Companies Managing Insurance Plans: Private insurance companies will run the health insurance plans available in SHOP, offering all the same benefits of standard employer plans. All information regarding plan cost and coverage will be simply worded and concise in order to easily compare plans.
• Choice of Broker or On Your Own: Selecting a plan through the SHOP can be done individually or through the use of a broker. The marketplace design allows easy plan viewing and comparison shopping. Alternatively, you can access the SHOP with your existing broker.

The Affordable Care Act (ACA) requires large businesses to adapt to new healthcare reforms. A business with 50 or more full-time or full-time equivalent employees is considered a large business. The most significant provisions directly affecting these businesses involve “Employer Shared Responsibility” and W-2 reporting.

What is Employer Shared Responsibility?

Starting in 2015, employers with 50 or more full-time or full-time equivalent (FTE) employees must provide affordable, adequate health insurance for full-time employees and dependents. The provision defines a full-time employee as an individual employed an average of 30+ hours per week. If at least 1 of their full-time employees is certified to receive a premium tax credit in an individual health insurance marketplace, the employer may be required to pay an assessment. A premium tax credit is available to help individuals or families to afford health coverage purchased through the exchange. Reliable time & attendance systems offer the safest and most efficient way to track employee hours and determine the total number of full-time or full-time equivalent employees. It’s important to note that large employers (over 50 full-time or FTE employees) will be required to report six consecutive months of labor records for 2013 to the IRS.

Pay or Play?

Employers must determine if they will “pay or play” meaning they will fail to provide adequate coverage to employees as required by the ACA and pay assessments (penalties) or comply with the ACA and provide affordable, quality health insurance coverage to employees. Employers must determine which option is best for the business and its employees. Large employers face assessments for the following:

• Failing to offer health coverage to all full-time employees (30+ hours per week) and their dependents
• Providing health coverage that does not meet the ACA requirements as affordable and providing minimum value
• Offering an insurance plan that does not meet the coverage requirements and having at least 1 full-time employee enrolled receiving insurance through the exchange

For More Information on Employer Shared Responsibility Provisions, visit the IRS’ website

W-2 Reporting of Aggregate Healthcare Costs

W-2 reporting will change for large businesses, by requiring employers to report the cost of coverage under an employer-sponsored group health plan on the W-2 form of each employee. The employer’s excludable contribution to health coverage continues to not be taxable; the information will provide employees with the cost of their health insurance coverage. For more information on W-2 reporting of employer sponsored health coverage, visit https://www.irs.gov/uac/Form-W-2-Reporting-of-Employer-Sponsored-Health-Coverage

• Provide Notification of Insurance Marketplace: Employers covered by the Fair Labor Standards Act (commonly having at least 1 employee and $500,000+ in annual business) must provide employees notification of coverage options available through the marketplace. Sample notices for employers who do offer a healthcare plan and employers that do not offer a healthcare plan are available from the Department of Labor. More information on notification of coverage can be found at http://www.dol.gov/ebsa/newsroom/tr13-02.html
• Provide Summary of Benefits and Coverage: A standard “Summary of Benefits and Coverage” form explaining plan options and costs must be provided to employees by employers. Template can be found at http://www.dol.gov/ebsa/pdf/correctedsbctemplate2.pdf
• Insurers Provide Medical Loss Ratio Rebates: If insurance companies spend less than 80% of premium dollars on medical care (versus administrative costs), they are required to provided rebates to policyholders. Employers receiving rebates have discretion to determine if the rebate is a plan asset and fairly allocate the rebate. Frequently asked questions regarding Medical Loss Ratio Rebates can be found at http://www.dol.gov/ebsa/faqs/faq-MLRrebate-consumer.html
• Flexible Spending Account Contributions Limited: Elective employee contributions to healthcare flexible spending arrangements (FSAs) max at $2500 (subject to cost of living adjustments) per year. The maximum does not extend to employer contributions. More information on flexible spending arrangements can be found at http://www.irs.gov/publications/p969/ar02.html#en_US_2012_publink1000204174
• Obligation to Increase Medicare Withholding on Wages: Employer must withhold additional tax for the employee portion of the Medicare Part A Hospital Insurance. Withholdings increased from 1.45% to 2.35% (up 0.9%) for single filers with incomes over $200,000 and married joint filers with incomes over $250,000. Answers to frequently asked questions regarding the additional Medicare tax can be found at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-Tax
• Tax on Net Investment Income: Taxpayers with Modified Adjusted Gross Income (MAGI) over $200,000 for a single filer and $250,000 for a married joint filer, will be assessed a 3.8% tax on net investment income (such as taxable capital gains, dividends, rents, royalties and interest). Answers to frequently asked questions regarding net investment income tax can be found at http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs
• Maximum 90-day Waiting Period for Employer-Provided Health Coverage: Eligible employees will wait no more than 90 days for employer-provided health coverage. IRS provides temporary guidance on the 90-day rule and will clarify in greater detail. The temporary guidance from the IRS can be found at: http://www.irs.gov/pub/irs-drop/n-12-59.pdf
• Transitional Reinsurance Program & Fees: The 3- year Transitional Reinsurance Program reimburses insurers in the individual marketplace for high claims costs. Employers pay fees for self-insurance plans and insurers pay fees for insured plans, which then fund the program. The estimated fees for 2014 will be $5.25 monthly ($63 annually) for each individual covered under employer-sponsored plans providing major medical coverage, including retiree programs. Fees are expected to decrease in 2015 and 2016. Fees from self-insured plans can be paid from plan assets and employer’s fees are tax-deductible. For more information on the Transitional Reinsurance Program, visit http://www.irs.gov/uac/Newsroom/ACA-Section-1341-Transitional-Reinsurance-Program-FAQs
• Rewards for Workplace Wellness Programs: Beginning in January 1, 2014, the maximum reward for a health-contingent wellness program increases to 30% (up 10%) of the cost of health coverage. Maximum rewards for programs to prevent or reduce tobacco use will reach as much as 50%. For more information on Workplace Wellness Programs, visit http://www.dol.gov/ebsa/newsroom/fswellnessprogram.html
• Required Reporting to the IRS: Beginning in 2015, employers that sponsor self-insured plans must file reports to the IRS detailing information for each individual covered on or after January 1, 2014. Answers to frequently asked questions on reporting requirements can be found at http://www.irs.gov/uac/Employer-Provided-Health-Coverage-Informational-Reporting-Requirements:-Questions-and-Answers