The healthcare law contains tax provisions that affect employers. The size and structure of a workforce–small or large–helps determine which parts of the law apply to which employers. Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates during the year.
The number of employees an employer has during the current year determines whether it is an applicable large employer for the following year. Applicable large employers (ALEs) are generally those with 50 or more full-time employees or full-time equivalent employees. Under the employer shared responsibility provision, ALEs are required to offer their full-time employees and dependents affordable coverage that provides minimum value. Employers with fewer than 50 full-time or full-time equivalent employees are not applicable large employers.
Employers with Fewer than 50 Employees
SHOP Marketplace Eligibility
Employers with fewer than 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.
Information Reporting–Self-Insured Employers
All employers, regardless of size, that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.
The first information reporting returns are due to be filed in 2016 for 2015.
Employers may be eligible for the small business health care tax credit if they:
- cover at least 50 percent of employees’ premium costs
- have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000
- purchase their coverage through the Small Business Health Options Program.
Employers with fewer than 50 full-time employees or full-time equivalent employees are not subject to the employer shared responsibility provisions.
Employers with 50 or More Employees
SHOP Marketplace Eligibility
Employers with exactly 50 employees can purchase insurance through the Small Business Health Options Program (SHOP) Marketplace.
All employers including applicable large employers that provide self-insured health coverage must file an annual return for individuals they cover, and provide a statement to responsible individuals.
Applicable large employers must file an annual return–and provide a statement to each full-time employee–reporting whether they offered health insurance, and if so, what insurance they offered their employees.
The first information reporting returns are due to be filed and furnished in 2016 for 2015.
In general, an applicable large employer will be subject to a payment if the employer does not offer affordable coverage that provides “minimum” value to its full-time employees and their dependents, and one or more full-time employees gets a premium tax credit.
Various forms of transition relief are available for 2015, including for applicable large employers with fewer than 100 full-time employees, including full-time equivalent employees. For additional details, please call the office.
How the Health Care Law Affects Aggregated Companies
The Affordable Care Act applies an approach to common ownership that also applies for other tax and employee benefit purposes. This longstanding rule generally treats companies that have a common owner or similar relationship as a single employer.
These are aggregated companies. The law combines these companies to determine whether they employ at least 50 full-time employees including full-time equivalents.
If the combined employee total meets the threshold, then each separate company is an applicable large employer. Each company–even those that do not individually meet the threshold–is subject to the employer shared responsibility provisions.
These rules for combining related employers do not determine whether a particular company owes an employer shared responsibility payment or the amount of any payment. The IRS will determine payments separately for each company.