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    The Affordable Care Act: An Introduction for Business Owners

    Posted by Sylvia Lagerquist, CPA

    The Affordable Care Act: An Introduction for Business Owners

    Editor’s Note: This is the first article in a three-part series. The second article will discuss common questions small business owners have about the impact of ACA, and the third will detail specifics of how ACA applies to businesses in Maryland and the District of Columbia.

    The Affordable Care Act (ACA), also known colloquially as Obamacare, is one of the most sweeping laws passed by Congress in the last decade. The law seeks to reform the U.S. health insurance marketplace; increase the percentage of Americans who are covered by health insurance; improve the affordability and accessibility of healthcare; and encourage small employers to provide insurance to their workers.

    How the ACA Defines a Small Business

    The first thing you should be aware of as an employer is that the law establishes different provisions, requirements and objectives depending upon the size of your business. Under the ACA, companies fall into these three categories:

    1. Businesses with fewer than 25 employees
    2. Businesses with fewer than 50 employees
    3. Businesses with more than 50 employees

    The focus of this article and subsequent ones in this series will be on key points relevant to smaller businesses, i.e. those with fewer than 50 employees overall. However, keep in mind that the law defines number of employees based upon Full-Time Equivalent (FTE). If you are not clear on how to assess your number of employees against this requirement, you can use this tool HealthCare.gov to determine the answer:

    Full-Time Equivalent (FTE) Employee Calculator
    https://www.healthcare.gov/shop-calculators-fte/

    If you have fewer than 50 employees (FTEs) in your business, your company is not subject to penalties for failing to provide insurance. And if you have fewer than 25 employees (FTEs) in your business, you may actually be eligible for employer health care tax credits, depending upon the average pay for your employees and other factors.

    The carrot that comes with being a small company (access to tax credits for employee coverage) is matched by a stick for larger ones (risk of heavy fines for failing to offer employee coverage). For companies in the middle, the key priority is to keep an eye on your growth.

    The ACA penalties, known as Employer Shared Responsibility Payments, can become very steep very fast, so any company that is close to reaching 50 FTEs should be prepared to address the health coverage requirements proactively. In addition to offering coverage, companies with 50 or more FTEs are also required to report to the IRS on the status of whether or not they are offering that coverage.

    The law also requires an employer covered by the Fair Labor Standards Act (FLSA) to provide notification to their employees regarding a number of key facts:

    • That the new ACA health insurance marketplace exists.
    • That employees may be eligible for a premium tax credit if they use the marketplace to purchase coverage.
    • That employees may also risk losing their employer contribution (if any) to healthcare coverage by purchasing insurance on their own through the marketplace.

    You are also required to provide employees with an annual Summary of Benefits and Coverage (SBC) form that provides a simplified presentation of their options.

    There are many other impacts from the ACA, among them:

    • Caps to the maximum amount an employee may contribute to a healthcare Flexible Spending Account (FSA).
    • Changes to the employee portion of the Medicare Part A Hospital Insurance (HI) withholdings.
    • The maximum waiting period for new employer-provided health coverage by eligible employees is fixed at no more than 90 days.
    • New incentives to support employer-sponsored workplace wellness programs.
    • New reporting requirements applicable to self-insured employers.

    For more information on any of these topics, please visit the following online resources:

    Small Business Solutions [HealthCare.gov]
    https://www.healthcare.gov/small-businesses/

    Affordable Care Act Information [SBA]
    http://www.sba.gov/healthcare

    Affordable Care Act 101: Key Requirements for Small Businesses [Intuit]
    http://payroll.intuit.com/support/kb/2001632.html

    In future articles, we will discuss the specifics of how small businesses can address common questions and concerns with the ACA, and what Maryland and D.C. business owners should know about the ACA specific to their jurisdictions.

    Are you interested in learning more about the impact of the Affordable Care Act (ACA) on your business? Speak with the certified public accountants at Haines & Lagerquist CPAs today, by calling Sylvia Lagerquist, CPA or Ross Beach, CPA at 301-249-0703.

    Image Credit: armymed (Flickr @ Creative Commons)

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