As you embark on your journey into 2018 as a health insurance broker, you will find many new opportunities. Compliance is a door opener and a sales closer. Using Compliance strategically will lead you to success and position you as a trusted advisor and client advocate.
In early January of each year, an employer should evaluate its group size to determine its Applicable Large Employer (ALE) status under the Affordable Care Act (ACA), and to determine its Federal COBRA or Cal-COBRA (if applicable) status, both of which are made by evaluating group size during the prior year. Reference Word & Brown’s exclusive Employee Count Reference for California employers or Nevada employers for help understanding how to make these evaluations.
You may have clients – or potential clients – who’ve re-evaluated their group size and found they are first-time ALEs for 2018. This means they must now comply with the ACA’s Employer Shared Responsibility provisions and are required to offer “affordable” Minimum Essential Coverage (MEC) that meets minimum value (MV) to “all” (the greater of 95% or five full-time employees) full time (FT) employees and their dependents, or be subject to hefty noncompliance penalties. Understanding how this works and impacts ALEs will help you provide a level of support to employers – and get your foot in the door for more business.
First-time ALE Transition Relief
First-time (new) ALEs are provided transition relief by the IRS, which allows eligible employers up to a three-month window, through March 31st annually, to comply with the ACA’s Employer Mandate. In order to be eligible for this transition relief, the first-time ALE must also have not offered coverage in the prior calendar year, and the first-time ALE’s new plan must be in place by 4/1. This transition relief is helpful for many employers who realize they are subject to the ACA’s mandates for the whole year, at the beginning of the year.
More Items for New Year Review…
Group Size ALE Status
An employer with an average of 50 or more full-time (FT) plus full-time equivalent (FTE) employees for the 12 months of the prior calendar year is an ALE for the entire following calendar year, even if its size drops below 50 during the year. Conversely, an employer with an average of less than 50 FT+FTE employees for the 12 months of the preceding calendar year is not an ALE for the entire following calendar year, even if its size grows to 50 or more during the year. It is very important to make this determination now, at the beginning of the year, so employers that need to comply with the ACA’s employer mandate can do so.
FTE Calculations
To calculate FTE count, total your part-time (PT) employees’ hours of service for each month (using a maximum of 120 hours for each PT employee, even if he or she averaged 121-129 hours of service), and divide each month’s total by 120. This is the employer’s FTE count by month. Reference Word & Brown’s exclusive FTE Calculator for California employers or Nevada employers for help with this calculation.
Group Size Calculations
In order to calculate an employer’s group size, total the number of FT employees and the number of FTE employees for each of the 12 months of the prior calendar year, then divide by 12 to get the average for the year. This is the employer’s group size. Note: employees covered by TRICARE or the VA should not be included in this calculation. Reference Word & Brown’s exclusive Group Size Calculator for California employers or Nevada employers for help with this calculation.
Control Groups
IRS controlled/aggregate rules apply. If the employer has ownership in multiple businesses that together are 50+ FTE, the IRS may consider the businesses as one employer, subject to the ACA’s employer mandate and reporting responsibilities – even if the businesses have different tax IDs and are otherwise not related. These complex tax rules fall under Internal Revenue Code Section 414, subparagraphs (b), (c), (m), and (o); a trusted tax or legal advisor should be consulted for help making this determination if it might apply.
Documentation
The IRS has begun to seek financial Employer Shared Responsibility Payment (ERSP) from ALEs in violation of the ACA’s Employer Mandate. It is critical to keep record of all documentation pertaining to group size calculations, coverage offers, coverage enrollment/declinations, etc., so it can be submitted to the IRS should an ERSP be assessed on the employer in the future.
