Fall 2015 Issue of Horizons

As it is difficult to determine an employee’s household income for the year, there are various safe harbor tests that can be performed in order to comply with this requirement. ∙ One safe harbor test is to determine compensation by Box 1 of W-2 pay for the year and the employer may prorate applicable amounts for partial years of employment. ∙ Another safe harbor test is to determine compensation by determining rate of pay. For hourly employees, this is determined by multiplying the hourly pay rate in effect at the beginning of the year by 130. For salaried employees, this is determined by the monthly salary in effect at the beginning of the year. ∙ The third safe harbor test to determine compensation is to use the federal poverty line tables or those in effect six months prior to the beginning of the plan year. The safe harbor tests can only be used if the employer offers its full-time employees the opportunity to enroll in minimum essential coverage under an eligible employer- sponsored plan that provides minimum value with respect to the self-only coverage offered to the employee. A plan meets the minimum value requirement if it’s designed to pay at least 60% of the total allowed costs of benefits provided under the plan. The Department of Health and Human Services (HHS) and the IRS have produced a minimum value calculator that can be used as a safe harbor test to determine if an employer’s plan meets the minimum value requirement.

According to one section of the law, the exchanges are to be established and operated by the states. Many interpreted other sections of the law to allow subsidies for those purchasing insurance on the federal exchanges. This was the crux of the battle that was argued before the Supreme Court in March of 2015. If the plaintiffs had prevailed in King v. Burwell , the decision had the potential to cripple the ACA. However, the Supreme Court held that tax credits are available to individuals in states that utilize a federally-facilitated exchange. Therefore, with this ruling, the Supreme Court upheld the major provisions of the ACA. With the ACA here to stay, below is a list of frequently asked questions regarding employer compliance with the law. Frequently Asked Questions What is the employer mandate and to whom does it apply? As a pivotal part of the ACA, certain employers must offer health insurance that is affordable and provides minimum value to their full-time employees, or full-time equivalent employees (FTEE’s), and their dependents, or be subject to an Employer Shared Responsibility payment (penalty). The employer mandate applies to applicable large employers, or those who employed 50 or more full-time employees, or FTEE’s, on average during the previous calendar year. In 2015, there is transitional relief of 100 full-time employees. How do employers know if their plan is affordable and offers minimum value? Affordable coverage means that the employee’s required contribution to the healthcare plan does not exceed 9.5% of the employee’s household income for the year.

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