ACA Employer Mandate
Overview
The ACA Employer Mandate went into effect on January 1, 2015. The employer mandate states that Applicable Large Employers (ALE) must offer health coverage to all full- time employees and must also report coverage details to the IRS or be subject to fines and penalties.

ALEs are employers who employed (in the preceding tax year) an average of at least 50 full-time or full-time equivalent employees on business days during the preceding calendar year. A full-time employee averages at least 30 hours of service per week. To calculate full time equivalent employees, monthly service hours for all non-full-time employees are totaled then divided by 120. When full time and full-time equivalent subtotals are added together and total more than 50 the employer is deemed an ALE.

Notably, employers must look back to the preceding tax year to determine whether they are deemed ALEs for the current year. Certain exceptions may apply if the workforce (a) exceeds 50 full-time or full-time equivalent employees for 120 days or fewer per calendar year, and (b) the employees that cause the workforce to exceed 50 are “seasonal workers.”

Problem
These penalties and audits are now being enforced. Audit rates and penalty enforcement continue to increase rapidly. Penalties are triggered when a full-time employee purchases a health plan through the marketplace and receives a premium tax credit or subsidy. Any employee who earns less than 400% of the federal poverty level is eligible for a subsidy.
If at least one full-time employee in any given month has been enrolled in a health plan through an Exchange, and for which the employee was allowed a Premium Tax Credit (PTC) or cost-sharing reduction, that ALE will be obligated to make an assessable payment. There are two separate penalties enforced penalty A and penalty B.

Penalty A
The ACA employer mandate’s large §4980H (a) penalty (frequently referred to as the “A Penalty” or the “Sledgehammer Penalty”) applies where the ALE fails to offer minimum essential coverage to at least 95% of its full-time employees in any given calendar month. The Section 4980H (a) penalty, issued to ALEs that fail to offer minimal essential coverage to at least 95 percent of their full-time employees and their dependents, are $2,750 per employee, or $229.17 a month, for the 2022 tax year. The assessed amount will be applied to all full-time employees, the employer can deduct 30 full-time employees from the total number of full-time employees when determining the penalty amount.

Solution
To avoid Penalty A the employer must offer minimum essential coverage (MEC) to all full-time employees. The offering of any of the Options Plus MEC plans will satisfy this mandate, Options Plus needs a minimum of 10 enrolled to maintain the offering and satisfy Penalty A.

Penalty B
An Applicable Large Employer must offer a health plan that meets minimum value requirements, the plan must cover at least 60% of the allowed cost of benefits provided under the plan and be deemed affordable. To be deemed affordable the employee only rate cannot exceed 9.61% of the employee’s W-2 earnings. This penalty is also triggered when an employee receives a premium tax credit on a plan through the marketplace. The penalty associated with this legislation is $4,120/ per employee per year or $343.33/month. This penalty is assessed per occurrence and a penalty on one employee does not mean a penalty for all as is the case for penalty A.

Solution
To avoid Penalty B the employer must offer at least a minimum value health plan and set the employee contribution at no more than 9.61% of the employee’s income. Waivers should be collected to validate the plan was offered and the employee contribution level. The offering and collection of valid waivers for the employees who choose not to participate will satisfy the mandate. As an alternative approach to administering the contributions and collecting complete and valid waiver information the enrollment in a group sponsored MEC plan where the employee receives a 1095 will also satisfy both penalties. The “MEC for all” solution for penalty B was added in Dec 2019 through the federal register.

ALE caluculation: 
1560 hours in a year is considered fulltime
30 hours x 52 weeks

MV:  8.39% of their income.= Employee Contribution
$419 per single

$20,000 per year...
8.39% of $20,000 is $1,678  (divided by 12 months) = $139.83 per month Employee Contribution.
$419 - $139.83= $279.17 per month Employer Contribution

$50,000 a year...
$50k x 8.39%= $4,195 (divided by 12 months= $349.58 per month Employee Contribution
$419 - $349.58= $69.42 per month Employer Contribution.

$60,000 a year...
$60k x 8.39%= $5,034 (divided by 12 months= $419.50 per month Employee Contribution
$419 - $419= $0 per month Employer Contribution.

$70,000 a year...
$70k x 8.39%= $5,873 (divided by 12 months= $489.41 per month Employee Contribution
$419 - $489= $0 per month Employer Contribution.

$80,000 a year...
$80k x 8.39%= $6,712 (divided by 12 months= $559.33 per month Employee Contribution
$419 - $559= $0 per month Employer Contribution.

Eligibility
For initial enrollment, the employee has to average 30 hours per week.

This is determined by using a look-back period.  You would add up all their hours over that defined period (anywhere from 3 months to 12 months) and see what the average is, if it averages 30 hours a week, they would be deemed full-time. They would be deemed Full-time for the same amount of time as the look back.   A 6-month look-back period is recommended.

​For New Hires & Waiting Periods: 

Once they are deemed a Full-time employee, they must satisfy their waiting period which could be the first of the month following (date of hire, 30 or 60 days).

Determining who is an Eligible Employee for Participation:
For purposes of determining which employees are eligible for insurance under a Small Employer plan and whether the Small Employer meets the Participation, full-time is defined as 25 hours per week.  A Seasonal employee who works 120 days or fewer per year is not considered an eligible employee

Determining if you are a Small or Large Employer
The definition of a Small Employer considers Full-time to be 30 hours per week and that definition of full-time is used solely for determining whether an employer is a Small or Large Employer.

For purposes of this calculation:
a) Employees working 30 or more hours per week are FT  employees and each FT employee counts as 1;
b) Employees working fewer than 30 hours per week are PT and counted as the sum of the hours each PT employee works per week multiplied by 4 and the product divided by 120 and rounded down to the nearest whole number.

NJ Continuation or COBRA
Is your firm subject to the requirements of the federal COBRA law?  
You may be subject to the law if you employed 20 or more employees during 50% or more of the working days during the previous calendar year.

For purposes of this question “employee” includes: full-time employees, part-time employees, seasonal employees, temporary employees, employees who are union members, owners, partners, and officers and excludes:  self-employed persons, independent contractors (1099), directors

Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours the part-time employee worked divided by the hours an employee must work to be considered full-time
 

TEFRA/DEFRA
Is your firm subject to Working Aged Provisions of federal law (TEFRA/DEFRA)?
You may be subject to the law if you employed 20 or more employees for 20 weeks in the current or prior calendar year.

For purposes of this question “employee” includes: full-time employees, part-time employees, seasonal employees, temporary employees, employees who are union members, owners, partners, and officers and excludes:  self-employed persons, independent contractors (1099), directors

Calculating Fulltime Employees FTE

The calculation of full-time equivalent (FTE) is an employee's scheduled hours divided by the employer's hours for a full-time workweek. When an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs. Employees scheduled to work 20 hours per week are 0.5 FTEs.

Healthcare.gov’s FTE Calculator 
Use the full-time equivalent (FTE) employee calculator below to see if your mix of full-time and part-time employees equals between 1–50 full-time equivalent employees.
https://www.healthcare.gov/shop-calculators-fte

Don’t include:

• Owners of a sole proprietorship.
• Partners.
• Shareholders owning more than 2% of an S corporation.
• Owners of more than 5% of other businesses.
• Family members or members of the household who qualify as dependents on the individual income tax return of a person listed above, including a spouse, child (or descendant of a child), sibling or step-sibling, and parent (or ancestor of a parent), step parent, niece or nephew, aunt or uncle, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
• Seasonal workers working 120 days or less in a year.
• Independent contractors (Form 1099 workers).
• COBRA and retired enrollees.

Seasonal employees - defined as an employee working fewer than 120 days in the previous calendar year. 

Temporary or Substitute worker - defined as one who is hired by the employer with the expectation from both parties that the termination of employment will occur after a set period of time, e.g. working less than 26 consecutive weeks.

Calculating the Average Total Number of Employees (ATNE)

Definition of ATNE
 

The Patient Protection and Affordable Care Act (PPACA) defines the number of employees at a company as “the average number of employees employed during the preceding calendar year.”

An employee is typically any person for which the company issues a W-2, regardless of full-time, part-time or seasonal status or whether or not they have medical coverage.

3 Steps to Calculate ATNE

1. Calculation of ATNE is based on the year prior to the renewal or effective date. Add all monthly employee totals together and divide by the number of months that the company was in business last year (usually 12 months).
2. Consider all months of the previous calendar year.
3. Use the # of employees at the end of the month as the “monthly value”.     If the company is a newly formed business, calculate the prior year average by using only those months that the company was in business.

Total sum of Employees = 153
Divide total number of employees by total number of months­.
153/12 = 13 average employees per month

Large Group Employer Shared Responsibility - Pay or Play
Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act
 

Visit:   https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act#Calculation

The Affordable Care Act added the employer-shared responsibility provisions under section 4980H of the Internal Revenue Code. The following provides answers to frequently asked questions about the employer-shared responsibility provisions. More detailed information is available on the Employer Shared Responsibility page and in final regulations under section 4980H.