endnotes
1. Pub. L. No. 111-148, as
amended by Pub. L. No. 111-
152.
2. 135 S..Ct. 2566 (2012).
3. This was accomplished
through a blog post by an IRS
official, an excellent illustration of why one needs to be
vigilant as “game changers”
can occur overnight or in
cyberspace.
4. See the sidebar on page 16.
Also note that PPACA amended the federal Fair Labor
Standards Act to require
employers to grant nursing
mothers a work break to
express milk. 29 U.S.C. §
207(r).
5. The U.S. Department of
Labor issued Technical Release
2013-12, which provides
instructions on how the notice
has to issue and what employ-
ers are subject to the notice
requirement. DOL has model
notices both for employers
who offer coverage and those
that do not.
6. The Marketplace offers health
insurance in bronze, silver,
gold and platinum plans.
7. Example for 2014 for a single
adult:
• Family income = $100,000
• Tax filing threshold = $10,000
• Excess income = $900 for the
year ($100,000 – $10,000 =
$90,000 times one percent)
• Flat rate = $95, so Excess
Income is greater ($900 >
$95)
• Bronze Plan cost = $3,000,
so $900 is lesser
• Annual tax penalty = $900
8. See www.irs.gov/uac/
Affordable-Care-Act-Tax-
Provisions-Home
subject to PPACA.
PPACA does contain exceptions for seasonal workers and
leased employees, among other things.
Specifically, if an employer’s workforce
exceeds 50 full-time employees for only 120
days or fewer during a calendar year, and the
employees in excess of 50 who were
employed during that period of no more
than 120 days were “seasonal employees,”
the employer would not be
deemed to have 50 full-time
equivalents and therefore subject
to PPACA. Also, IRS guidance
indicates that employees hired
from a temporary staffing agency
(generally, “leased employees”)
will not be considered employees
of the service recipient employer,
but will be employees of the
temporary staffing agency. Also
note that certain entities that
are deemed to be a “single
employer” for tax purposes, (e.g.
employees who are members
of a “controlled group of corporations”) will also be a single
employer for determining the number of
full-time employees under PPACA. In addition, grandfathered plans will not be subject
to PPACA until their current contract
expires (with exceptions for self-insured
grandfathered plans). (For a description of
PPACA provisions already in effect, see
page 16.)
Is the coverage affordable and does it
provide minimum value?
Large employers subject to PPACA will not
be subject to penalties unless one or more of
its full-time employees claims a premium tax
credit. Employees who are not offered
employer-sponsored coverage that is
“affordable” or provides “minimum value,”
or employees who are not offered employer
sponsored coverage at all, will be able to
obtain their insurance through an exchange.
Those employees can obtain a tax credit
equal, in some instances, to the monthly
premiums they paid for obtaining that cov-
erage.
For an employer’s coverage to be affordable and provide minimum value, and
therefore avoid an employee’s tax credit and
resulting penalty, generally the individual’s
required contribution toward the plan
premium for self-only coverage must not
exceed 9. 5 percent of their household
income (i.e., it must be affordable), and the
plan must pay for at least 60 percent, on
average, of covered health care expenses
(i.e., it must provide minimum value). Also
note this coverage must only be provided
to the full-time employees, not part-time
employees, even though those part-time
employees were counted for purposes of calculating the 50 FTEs for “large employer”
PPACA coverage.
What are the penalties? (See Flowchart 2,
p. 18)
As stated above, a large employer will be
subject to a penalty if any of its full-time
employees receives a premium credit toward
an exchange plan. The monthly penalty
assessed to employers who do not offer
coverage will be equal to the number of
full-time employees minus 30 multiplied by
1-12th of $2,000 for any applicable month
in which there is no coverage.
Employers who do offer
health coverage but do not provide minimum value and affordable coverage also may be subject
to a penalty. In this instance,
the monthly penalty assessed to
the employer for each full-time
employee who receives a premium credit will be 1-12th of
$3,000 for any applicable month
or the total number of full-time
employees minus 30, multiplied
by 1-12th of $2,000 for any
applicable month, whichever is
lesser. These penalty amounts will
be adjusted for inflation each year.
Conclusion
Large employers have until Jan. 1, 2015, to
play (provide minimum value and affordable coverage to employees) or pay (accept
the referenced penalties). Employers
should undertake a cost-benefit analysis
with their attorneys, accountants and insurance brokers to examine the implications of
the law in deciding whether to pay or play.
Virtually all employees have until Jan. 1,
2014, to become covered with health
insurance or pay the penalty. Like their
employers, they also need to engage in a
cost-benefit analysis with legal, tax and
insurance professionals.
Play or Pay?
AZ AT
Large employers have
until Jan. 1, 2015, to
play (provide minimum
value and affordable
coverage to employees)
or pay (accept the
referenced penalties).
—continued from p. 17
