Healthcare Reform 2014: Small Business Compliance Reporting

By David Dawley, Abshier House

Like any new regulation, a small business owner might think about the Affordable Care Act (ACA) and worry about staying in compliance with all the new rules. The size of your business is a major factor in how healthcare reform laws will affect you: Overall, ACA compliance boils down to the number of employees a small business has on its workforce.

  • Businesses with less than 50 full-time workers do not need to provide healthcare coverage. According to the Small Business Association (SBA), almost 96% of all American firms operate with less than 50 employees. Thus, nearly all small businesses are exempt from employer-shared responsibility for coverage. That’s nearly 5.8 out of the 6 million firms in our country.

    Of the firms that have more than 50 employees, only 0.2% do not already provide insurance coverage to their employees. Although facing a year delay, businesses with less than 50 employees will soon be able to “shop” for coverage for their employees using the Small Business Health Options Program (SHOP) Marketplace. They may also choose other outside options to provide coverage but remember, they are not required to.

  • Businesses with less than 25 workers may be eligible for healthcare reform tax credits. If you have no more than 25 employees and choose to provide insurance for them through the SHOP Marketplace, you may be eligible, as a business, for substantial tax credits.

    Businesses with less than 10 employees may be eligible for the maximum benefit, which can help offset as much as 35% of your healthcare costs. (This rate is scheduled to rise to 50% in 2014.)

  • Businesses with 50 workers or more must provide them with healthcare coverage. If you have 50 or more full-time employees, or your workforce rises over the magic 50 full-time equivalent (FTE) employees mark, you must begin providing insurance options to all employees or face penalties.

ACA requirements regardless of size

Although employers are not required to provide health insurance to employees, other procedures must be monitored and reported. The requirements may vary state by state depending on whether or not your state has signed up for the SHOP program.

Watch out for stiff penalties if you don’t comply. The penalties come in two categories: those providing no coverage and those providing unaffordable coverage, defined in the ACA as more than 9.5% of the employee’s paycheck.

Currently the penalty for failing to provide insurance is $2,000 per employee minus 30 employees. For example, if you have 55 employees, pay $2,000 x 25 employees every year until you’re in compliance.

Also, if you provide insurance coverage to your employees, you are responsible to report both the amount you contribute plus the amount your employee contributes to the IRS on form W-2.

Just because these amounts are reported on an employee’s W-2 does not make them taxable.

Reporting was optional in 2011, giving businesses a chance to ease in, but now includes all employers (including churches) with the exception of federally recognized tribal governments.

What do I need to tell my employees about healthcare reform?

Employers must give the following information to their employees at time of hire:

  • Employers must provide written notice telling employees about the state’s Exchange, including contact info.

  • The employer must also tell employees if their insurance meets state and federal requirements as well as let them know they may be eligible for a tax credit and cost-sharing reduction if they decide to go with the exchange.

  • And finally, employers must tell employees they may lose the employer’s portion of the coverage if they use the exchange.