Business

5 Things Every Business Owner Should Know About the Affordable Care Act

If you’re a business owner and oversee a team of employees, you understand that you’re mandated to provide your full-time workers with health insurance coverage.

Failing to do so can attract penalties set under the provisions of the Affordable Care Act (ACA), also known as Obamacare.

Remember that providing health insurance is a single facet of the Obamacare requirements you’re obligated to meet. The Affordable Care Act has a wide range of conditions you must also comply with to qualify.

Neglecting to review or intentionally overlooking what’s required of you as an employer can cause you to incur expenses that can be costly to your business.

To ensure your business is in compliance with ACA guidelines, here are five things you need to know about the Affordable Care Act.

If you have over 50 employees, you may be required to provide healthcare insurance

If you have over 50 full-time employees, the Internal Revenue Service (IRS) labels your business as an ALE (applicable large employer).

Under ALE status, a business owner must offer your employees affordable healthcare coverage based on the number of workers employed at your place of employment.

Failing to provide coverage plans for your employees as per the ACA requirements can attract rather costly penalties.

Fortunately, leading insurance platforms, such as AHiX Marketplace, provide business owners with resources to check and compare the available health insurance options to make an informed decision and avoid penalties.

The number of full-time employees may vary according to ACA standards

While some employers define a full-time worker as an employee that adheres to a 40-hour+ work week, the Affordable Care Act’s definition varies.

According to the ACA, a full-time employee is any individual employed by the company who works for more than 30 hours a week. The ACA doesn’t just count full-time heads, meaning the number of part-time workers can affect the final tally of full-time employees.

For instance, you could have 50 full-time employees and 30 part-time workers, but under Obamacare’s standards, you should assume you have more than 60 employees according to total hours worked.

With this alternative definition in mind, you must then provide health coverage to all employees working 30 hours or more or be subject to a penalty.

In other cases, you could have more than 50 full-time workers according to ACA standards, even if you, technically, don’t have any full-time employees. If part-time workers accumulate enough total weekly hours, you’re indebted to providing basic health insurance access.

Therefore, it’s essential to refer to your region’s marketplace calculator to compute the exact number of full-time equivalent workers.

You can have a tax credit

Suppose your business is still growing and consists of less than 25 employees with an average salary of about $50,000 annually. In that case, you may qualify for a tax credit of as high as 50 percent of the cost of insurance you purchase.

In these instances, you must consult with your insurance advisor to help you navigate this process and avoid making common mistakes. However, if you haven’t used tax credit before, adjust your tax returns and take them back.

You and your family members don’t count as full-time employees

When it comes to calculating the total number of full-time employees you have, you shouldn’t count yourself, your children, your spouse, or even your shareholders.

Additionally, you shouldn’t include your business partners, regardless of the size of their shares in the company.

When tallying your full-time employees, refrain from counting your business partners’ family members such as their children, spouses, parents, grandparents, or even in-laws.

The type of insurance coverage you offer must be considered affordable by the ACA standards

For insurance coverage to be considered affordable, it must cover a minimum of 60% of a beneficiary’s covered medical expenses. It should also cover all pre-existing conditions from enrollment without yearly or lifetime limits for primary health benefits.

Secondly, your employees can’t pay more than 9.5% of their annual household income for insurance coverage for these plans to fall within the affordable range.

Meeting this final criterion can be difficult, as there is an arising concern of how to calculate your employee’s household income accurately. To simplify this process, the IRS offers three critical methods to help determine your employees’ household income.

The first option is to reference W-2 wages. With this method, you must ensure that an employee’s contribution doesn’t exceed 9.5 percent of their gross salary.

Alternatively, you can also use the employee’s hourly or monthly pay rates to determine affordability. The last method to determine affordability is to use the Federal Poverty Line (FPL). Ideally, the workers’ cost of health insurance shouldn’t exceed 9.5% of the Federal Poverty Line.

Conclusion

To avoid paying a penalty tax, adhere to the guidelines of the Affordable Care Act.

When you abide by these ACA standards, you not only protect your business from incurring burdensome fees and penalties, but you’re also able to reiterate your commitment to providing your employees with affordable healthcare options.

When your employees believe their health and well-being is prioritized, productivity will surge, and retention will increase.

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