The impact of the Affordable Care Act on businesses will depend on the size of the business and the number of employees that are offered insurance. There are penalties and tax breaks in place designed to incentivize businesses to offer coverage to their employees.
It’s important to understand the difference between individual, small and large group markets since it will affect the potential savings or penalties.
In California, the maximum number of full-time employees you can have and still quality for a small group plan is 50. At the federal level, small group plans extend up to 100 employees, as will California starting in 2016.
As an employer, it is your responsibility to inform your employees in writing about Covered California, the state benefit exchange. You must also notify your employees if they qualify for a subsidy through the benefit exchange.
The waiting period for new full-time employees that are eligible for insurance has been shortened to 60 days for small group plans and 90 days for large group plans. Full-time employees are those who average at least 30 hours per week.
Employee flex spending accounts (FSA) will have an annual contribution limit of $2,500. Going forward in 2014, the FSA maximum will be adjusted based on cost of living.
Businesses must file a report with the IRS outlining whether its employees are offered essential coverage, the cost of the lowest monthly premium, employer share of cost, number of employees and information regarding employees covered under a group plan. This report must include your federal tax ID number and you must notify employees in writing that this information is being submitted.
The small business tax credit offers significant savings for businesses with 25 or fewer employees. Here are the requirements to qualify for the small business tax credit:
The small business tax credit will increase in 2014, up to as much as 50% for small businesses and 35% for non-profits.
If you do not offer insurance to at least 95% of employees and dependents, there is a $2,000 penalty per employee, although the first 30 employees will not be subject to the penalty. For example, if you have 50 employees and don’t offer any insurance, your penalty would be for only 20 employees, although it would still cost $40,000.
If you have more than 50 full-time employees–remember the full-time requirement is only 30 hours per week–then you will have to pay a $3,000 per employee penalty for each one that receives a premium tax credit. An employee can only receive such a credit if the employer offered insurance does not meet the minimum requirements or is unaffordable, meaning it exceeds 9.5% of their family income.
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