Menu
Most small businesses while perhaps aware of the affordable care act (ACA), also known as ObamaCare, many have ignored or are oblivious to the important deadlines kicking in this year. Here are 5 important facts every small business needs to know for 2016.
The employee mandate, which requires employers to provide health insurance for their employees, kicks in for small businesses with at least 50 employees. Last year the employee mandate was enforced for businesses with 100 employees or more. If your business employs 50 people full time or more during the course of the year, you must be compliant with the employee mandate to avoid tax consequences. Full time employees are generally considered those who work 2000 hours or more a year. The IRS will consider the number of employees and the amount of hours worked collectively to determine whether you trigger the employee mandate. For example, if you have 80 half time employees (the equivalent of 40 full time employees) and 10 full time employees, you will trigger the employee mandate because you will be employing the equivalent of 50 full time employees. It can get complex quickly for a small business who ignores the employee mandate, be sure to check whether your business may be liable.
Some businesses may be tempted to outsource some of their workforce to another business that has the same ownership. This will be disallowed by the IRS, tax law considers smaller employers with the same ownership as a single employer for ObamaCare taxation purposes.
If your small business has triggered the employee mandate, any health insurance plan offered must meet the bronze-level insurance requirements. The bronze level insurance policies under the ACA must cover at least 60% of the employee’s healthcare costs. Many insurers have made their small business packages ACA compliant, but be sure to inquire if you are renewing your policy or searching for a new one.
Any employer providing a group healthcare plan must still be compliant with the Affordable Care Act’s rules and regulations. This extends to prior existing group plans and even to group plans offered by small businesses which have not triggered the employee mandate (fewer than 50 employees). Some small businesses choose to provide a few key or full time employees basic health insurance but often times these are not ACA complaint and can result in major tax penalties for your small business. The penalty for non-compliance can be $100 per day for each employee penalty.
One of the new requirements for health insurance plans under the ACA employee mandate is that all plans offered must meet an “affordability” standard. Affordability is defined as a health plan’s cost not amounting to more than 9.5% of an employee’s annual household income. If your business’s insurance plan offered to employees costs more than the 9.5% of the employee’s annual household income, you will be required to subsidize more of the insurance plan. Unfortunately, it is difficult for employers to know the household income for employees (employers will only know the income generated by one of the parties of the household). Discuss with your insurance provider and accountant to help stay in compliance, as the penalty can be costly, between $2,000 and $3,000 per employee.
For more information about how your small business can stay in compliance with the ACA and other important rules and regulations, call Reidel Law Firm at (832)510-3292 or use the form below for a free consultation.