The Affordable Care Act likes to keep you on your toes. It’s a piece of legislation that’s peppered with tons of rules you need to follow in order to keep your employees safe and sound. And follow you do, no matter how long it takes. The National Small Business Association found that the average tiny employer spends 13 hours a month fiddling with ACA compliance.
In this article, we’ll help you sweep back some of that time. We’ll dip into what the ACA is all about and what you have to do if you want to score an A+ on your health insurance report card.
So, what is the ACA?
The ACA is a hefty piece of legislation that is meant to help people get their hands on more affordable medical coverage. It explains how carriers, employers, individuals, and other entities can make health insurance more accessible. For small business owners, the employer mandate is where that responsibility is really sketched out. The mandate tells companies they need to offer full and affordable health insurance if they have 50 or more full-time equivalents on staff. Wait, doesn’t everyone have a different notion of what’s affordable? Yes. And here’s how the ACA spells it out:
Affordability = The cheapest single-person plan needs to have a premium that is 9.66 percent or less of an employee’s overall household income.
If employers don’t stick to the rules, they’ll have to pay the IRS a penalty called the shared responsibility payment. Getting slammed with a ton of rules? It’s way better then being slammed with a ton of fines.
Does the employer mandate apply to me?
To find out if the rule applies to you, you first have to figure out how many full-time equivalent (FTE) employees you have on your team. Use the formula below to crack the code on your FTE number:
(Total hours worked by part-time employees each week / 30) + # of full-time employees = Your FTE number)
If you need a little more help, you can also jump through the steps below:
- How many hours do each of your part-time employees work each week? Add them all up.
- Divide the result you get by 30.
- Round down to the nearest whole number.
- How many full-time employees do you have?
- Add this number to what you got above.
- Bravo — you’ve just successfully figured out your FTE number!
The number you just got is your formula for figuring out your ACA requirements. Now, use it to find where you fit on this chart:
|I have 49 or fewer FTE employees:||Nope, you don’t have to provide health coverage. That being said, many companies proudly offer insurance to their teams even though the ACA doesn’t explicitly require them to.|
|I have 50 or more FTE employees:||Yes, you do have to offer health coverage! Ninety-five percent of your full-time employees have to be covered.|
Think back to how big your team was in the previous year. That number will help you find out if you’re required to offer insurance today.
The Affordable Care Act is a big Act to follow. In fact, it’s the ultimate Act to follow. But hopefully you now have the basics down so it won’t feel like you’re about to fall off a tightrope. With your requirements tamed, you’ll feel completely in control as you walk the line to total compliance.