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Friday, February 21, 2014

Employers: Avoid ACA Penalties, But Only If You Act Now


The IRS has released some long-awaited final regulations (regs) for the Affordable Care Act (ACA)—with additional final regs on information-reporting requirements expected soon. What was the key takeaway from the most recent regs? Employers must act now—and meet specific requirements in 2014—in order to take advantage of transitional relief benefits:


How Many People Do You Employ?*

What do you need to do right now?

1-49

No action required.

50-99

“Midsize Employers”

Meet certification requirements—ASAP!

In 2014, your company must meet certification requirements if you want to take advantage of the transitional relief and delay the “pay-or-play” tax penalties until 2016.

Do you meet the requirements for certification?

Click here to find out.

100 +

“Large Employers”

Double check your full-time employee (FTE) and FTE equivalent headcount—ASAP!

There’s a chance you could still qualify as a “midsize employer”. Contact your Armanino tax advisor to learn more about how they can help you minimize your FTE and FTE equivalent headcount.

If you’re sure you have more than 100 employees, you could qualify for large employer transitional relief if you offer minimum essential coverage to at least 70% of your FTEs.

Click here to learn more.


 Midsize Employers – Meet Certification Requirements Now

Under the final regs, eligible “midsize employers” will not be subject to the pay-or-play tax penalties until 2016—as long as they meet the following requirements during 2014:

  • Employ (on average) fewer than 100 FTEs or FTE equivalents during 2014
  • Maintain its workforce size and aggregate hours of service (meaning the employer may not reduce its workforce or overall hours of employee service to qualify)
  • Maintain the health care coverage it offered as of Feb. 9, 2014
  • Certify that your company meets these information-reporting requirements  

NOTE: Even if your company meets the “midsize employer” requirements for certification, it will still be subject to the ACA’s large-employer information-reporting requirements under IRC Section 6056 in 2015.

Additionally, the IRS has yet to issue all of the final regs on information-reporting requirements. Once the full regs are released, Armanino will be able to work with your health insurance provider to provide a comprehensive reporting solution for ACA compliance including FTE and FTE equivalent analysis and IRS reporting certification. We’ll be sending out additional information once the final regs are issued.

 Large Employers – Focus on 70% of Employees
Under the ACA, large employers that don’t offer at least 70% of their FTEs minimum essential health coverage and that don’t qualify for the midsize-employer penalty relief in 2015 will be assessed a $2,000 tax penalty (payable for all FTEs minus the first 80 FTEs) if one of their FTEs receives a premium tax credit when buying health care insurance from an insurance exchange. As long as employers offer 70% of their FTEs minimum essential coverage this penalty will not apply.

However, in 2016, employers must offer at least 95% of their FTEs minimum essential health coverage to avoid this same tax penalty.

Additional Transitional Relief and ACA Clarifications
The final regs extend and expand transitional relief in other ways as well, such as:

  • In preparing for 2015, employers can determine whether they had at least 100 FTEs in 2014 by reference to a period of at least 6 consecutive months (instead of a full 12 months).
  • Employers with plan years that don’t start on January 1st can begin compliance with the pay-or-play provision at the start of their plan years in 2015
  • The requirement to offer coverage to FTE’s dependents will not apply in 2015 if an employer is taking steps to arrange for such coverage in 2016

NOTE: The IRS indicated it would consider whether it’s necessary to extend any of this transitional relief beyond 2015.

Clarifications on FTE Qualifications
The final regs also allow employers to use an optional look-back measurement method to determine whether employees with varying hours and seasonal employees are full time for purposes of determining large employer status. They also clarify the application of the look-back and alternative monthly methods of determining full-time status.

Additionally, the final regs clarify whether certain types of workers will be considered full time. For example, bona fide volunteer hours worked for government or tax-exempt entities won’t cause the volunteer to be considered a full-time employee.

Contact Us
The IRS is expected to issue final regs that will substantially streamline information-reporting requirements related to the employer mandate soon. We’ll be sending out additional information once the final requirements are issued.

In the meantime, if you’re unsure if your business meets the transitional relief requirements, or if you’re still trying to minimize your FTE and FTE equivalent headcount, Armanino can help you minimize your tax risk.

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