ACA: Time to Figure Out What ‘Affordable’ and ‘Minimum Coverage’ Mean

Under what circumstances will an employer owe an Employer Shared Responsibility payment?

In 2014, says Simon, Senior Legal Editor at BLR, if an employer meets the 50 full-time employee threshold, the employer generally will be liable for an Employer Shared Responsibility payment only if:

4980H(a) liability—The company doesn’t provide coverage to substantially all (95% or more) employees (or doesn’t provide coverage at all), and at least one of the full-time employees receives a premium tax credit to help pay for coverage on an Exchange

or

4980H(b) liability—The employer offers health coverage to at least 95% of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on an Exchange, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either “unaffordable” to the employee (see below) or did not provide “minimum value” (see below).

In both cases, at least one employee has to have gone to the Exchange and received a premium tax credit.

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:

• W-2 test. 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.
• Actual rate of pay test.

Federal poverty limit test.

HR budget cuts? Let us help. HR.BLR.com is your one-stop solution for all your HR compliance and training needs. Take a no-cost, no-obligation trial and get a complimentary copy of our special report Critical HR Recordkeeping—From Hiring to Termination. It’s yours—no matter what you decide.

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 percent of the total allowed cost of benefits that are expected to be incurred under the plan.

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

Implementing the ACA—just one more daily challenge. In HR, if it’s not one thing, it’s another. Like FMLA intermittent leave, overtime hassles, ADA accommodation, and then on top of that, whatever the agencies and courts throw in your way.

You need a go-to resource, and our editors recommend the “everything-HR-in-one website,” HR.BLR.com. As an example of what you will find, here are some policy recommendations concerning e-mail, excerpted from a sample policy on the website:

Privacy. The director of information services can override any individual password and thus has access to all e-mail messages in order to ensure compliance with company policy. This means that employees do not have an expectation of privacy in their company e-mail or any other information stored or accessed on company computers.

Find out what the buzz is all about. Take a no-cost look at HR.BLR.com, solve your top problem, and get a complimentary gift.

E-mail review. All e-mail is subject to review by management. Your use of the   e-mail system grants consent to the review of any of the messages to or from you in the system in printed form or in any other medium.

Solicitation. In line with our general policy, e-mail must not be used to solicit for outside business ventures, personal parties, social meetings, charities, membership in any organization, political causes, religious causes, or other matters not connected to the company’s business.

We should point out that this is just one of hundreds of sample policies on the site. (You’ll also find analysis of laws and issues, job descriptions, and complete training materials for hundreds of HR topics.)

You can examine the entire HR.BLR.com program free of any cost or commitment. It’s quite remarkable—30 years of accumulated HR knowledge, tools, and skills gathered in one place and accessible at the click of a mouse.

What’s more, we’ll supply a free downloadable copy of our special report, Critical HR Recordkeeping—From Hiring to Termination, just for looking at HR.BLR.com. If you’d like to try it at absolutely no cost or obligation to continue (and get the special report, no matter what you decide), go here.