Benefits and Compensation

Tackling the ADA—‘Affordable’ and ‘Minimum

[Go here for yesterday’s Q&A]

How does an employer know whether the coverage it offers is “affordable”?

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee.

If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement (see below).

Because employers generally will not know their employees’ household incomes, employers can take advantage of one of the affordability safe harbors set forth in the proposed regulations. Under the safe harbors, an employer can avoid a payment if the cost of the coverage to the employee would not exceed 9.5% of the wages the employer pays the employee that year, as reported in Box 1 of Form W-2, or if the coverage satisfies either of two other design-based affordability safe harbors. 

How does an employer know whether the coverage it offers provides “minimum value”?

A minimum value calculator will be made available by the IRS and the Department of Health and Human Services (HHS). Employers can input certain information about the plan, such as deductibles and co-pays, into the calculator and get a determination as to whether the plan provides minimum value by covering at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.

When can an employee receive a premium tax credit?

Premium tax credits generally are available to help pay for coverage for employees who:

  • Are between 100% and 400% of the federal poverty level,
  • Enroll in coverage through an Affordable Insurance Exchange,
  • Are not eligible for coverage through a government-sponsored program like Medicaid or CHIP, and
  • Are not eligible for coverage offered by an employer or are eligible only for employer coverage that is unaffordable or that does not provide minimum value.

Are class action lawyers peering at your comp practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Try it for 30 days … on us.

How will penalty assessments work?

The IRS will contact employers to inform them of their potential liability for shared responsibility payments and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after employees’ individual tax returns are due for that year claiming premium tax credits and after the due date for employers that meet the 50 full-time employee (plus full-time equivalents) threshold to file the information returns identifying their full-time employees and describing the coverage (if any) that was offered.

If it is determined that an employer is liable for an Employer Shared Responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file.

Is more detailed information available?

Yes. Treasury and the IRS have proposed regulations on the new Employer Shared Responsibility provisions. Comments on the proposed regulations may be submitted by mail, electronically, or hand-delivered, and are due by March 18, 2013.

The complete Q&A may be found here:
IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

Figuring out what’s what with the ACA—just one of every comp manager’s challenges. How about just the wagehour piece? What’s the regular rate for overtime? Prevailing wage? Mobile devices after hours—the list of ways you can get into trouble seems endless. How do you really know if your managers and supervisors are following your guidelines? There’s only one way to find out what sort of compensation shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based  program called FLSA Wage and Hour Self-Audit. Why are checklists so great? Because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

Experts say that it’s always better to do your own audit, and fix what needs fixing, before authorities do their audit. Most employers agree, but they get bogged down in how to start and, in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.

What our editors strongly recommend is BLR’s FLSA Wage & Hour Self-Audit Guide. It is both effective and easy to use, and even won an award for those features. Here’s what customers like about it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated the FLSA’s endless legalese into understandable terms.
  • Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.

All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Find out more.  

  • Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
  • Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
  • Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s FLSA Wage & Hour Self-Audit Guide includes all the changes.

You can examine BLR’s FLSA Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it. 

2 thoughts on “Tackling the ADA—‘Affordable’ and ‘Minimum”

  1. Here are the other two safe harbors for affordability that allow an employer to escape penalty:
    • The employee’s monthly contribution amount for the self-only premium is equal to or lower than 9.5 percent of the computed monthly wages; or
    • The employee’s cost for self-only coverage doesn’t exceed 9.5 percent of the federal poverty line for a single individual.

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