Affordable Care Act Update: What Every Small Business Owner Needs to Know
New businesses and seasonal businesses face more complicated compliance requirements. That’s because seasonal businesses have access to an exception to the employer mandate as long as they reach the 50+ employee threshold (or the 100+ threshold in 2015) on no more than 120 days of the year and only reach that threshold due to seasonal employees. Seasonal employees are those who perform services on a seasonal basis as defined by the Department of Labor, and includes retail workers employed exclusively during holiday seasons.
New companies must comply with the employer mandate, despite not having a previous basis to determine their status. The IRS says that a new business is considered an applicable large employer in its first calendar year if it expects to employ 50 or more full-time employees on average and actually does employ at least 50 full-time employees during the calendar year. So the person starting a new business must look at expectations from day one to determine if it is subject to the employer mandate.
When Small Businesses Self-Insure
Some small businesses have chosen to self-insure, which exempts them from ACA requirements like insurance taxes and specified benefits. To the employee, their employer’s self-insurance functions like any other health insurance plan. Self-insured employers usually contract with another company to administer claims while paying for most healthcare costs directly. Employers who elect to self-insure buy stop-loss coverage for themselves to protect the company should claims exceed a certain amount.
Self-insurance is really only a good choice for businesses that employ a young, healthy workforce, but brokers of stop-loss coverage have reported increased business since the ACA went into effect. It is important to note that some states are trying to pass legislation to limit self-coverage, including California, Rhode Island, and Minnesota. The reasoning behind the restrictions is that companies with young, healthy workforces could self-insure, leaving risk pools for traditional insurers that are older and sicker, and making traditional insurance more expensive.
Requirements for Businesses With Fewer Than 50 Employees
Businesses that have fewer than 50 full-time employees still have obligations under the ACA. Specifically, they must:
- Provide notice to employees of the existence of the Health Insurance Marketplace, possible employee eligibility for tax credits if they purchase insurance through the Marketplace, and that they may forfeit their employer contribution towards health insurance if they choose coverage through the Marketplace
- Provide a Summary of Benefits and Coverage Disclosure, which explains what any employer-offered plan covers and what it costs. This can help employees make better decisions about obtaining coverage through work or through the Marketplace.
- Withhold additional Medicare on employees earning over $200,000 (if they file singly) or $250,000 (if they file jointly). The tax increase comes from the employee, but employers are obligated to do the withholding.
- Restrict any waiting period for the date upon which employees are eligible for coverage to 90 days or less. This applies to all employer-sponsored plans.
Healthcare benefits are important to small businesses for recruiting or retaining a competitive workforce, and many small businesses strive to make such benefits available to employees. One way they are able to do this is through a partnership with PEO. Because PEOs pool together numerous businesses, they are often able to obtain for their clients better healthcare plans at more competitive rates.
Moreover, by working with a PEO, a small business owner can be confident that the business will be in compliance with the many complex requirements under the ACA and avoid inadvertently running into penalties for noncompliance. PEOs are in the business of staying on top of the many and varying requirements under laws like the ACA, as well as workers’ compensation and other regulations.
Is the ACA Affecting Your Business? SourceOne Partners Can Help
SourceOne Partners is ready to help small businesses evaluate their needs and their obligations under the ACA and other laws, and to help them select a PEO that can take care of the many HR tasks that even the smallest business must deal with. If your small business is struggling to carry out essential HR functions, SourceOne Partners can help you analyze PEO costs vs. benefits, understand exactly how PEOs calculate client costs, and find the right PEO to keep you on top of ACA and other challenges in the coming year. To learn more, contact us online or call 561-674-0748.