Over the past few years, the Trump administration and Republicans have consistently worked to repeal the Affordable Care Act (ACA). The most significant of these efforts was the 2017 Tax Cuts And Jobs Act (TCJA), which repealed the ACA's individual mandate requiring all Americans have health insurance or pay a penalty. This repeal went into effect starting in January 2019.
The TCJA does not repeal all provisions of the ACA however. As a business owner, it is important to know that the new tax law did not change the ACA's mandate requiring employers to provide adequate and affordable health insurance to their employees.
To help clear up any confusion about what parts of the ACA remain in force and which parts have been repealed, here we will discuss what you need to know in order to comply with the ACA in 2019 and beyond.
Which Employers are Subject to the ACA's Mandate?
Under the ACA, if you employ 50 or more full-time employees, you must offer ACA-compliant health insurance to those employees and their families or face potentially stiff penalties from the IRS.
The number of full-time employees you have is based on your employment figures from the previous year. So for 2019, if you had 50 or more full-time employees during six months or more of 2018, you are subject to the mandate.
If you employ fewer than 50 full-time employees, you are not subject to the mandate and not legally required to offer health insurance coverage.
What Are the IRS Reporting Requirements for Employers Subject to the ACA Mandate?
If you are subject to the ACA mandate, you must prove you offered ACA-compliant health insurance to your full-time employees by issuing a form 1095-C to each affected employee and then sending completed copies of those forms, along with a 1094-C, to the IRS.
Each year, these forms should be issued and filed by the following deadlines:
January 31: Distribute 1095-Cs to employees
February 28: Mail completed 1094-C to the IRS (or by March 31st if e-filed)
April 1: E-file the 1094-C with the IRS (required for those with over 250 employees)
What Are the Penalties for Non-Compliance with the Employer Mandate?
If you fail to comply or to properly document your compliance, you can face significant penalties. There are three different penalties for non-compliance, and they have all increased for 2019.
The first type of penalty, known as the sledgehammer penalty, is imposed if you fail to offer any insurance coverage at all. Under this penalty, you must pay $2,500 per year for each full-time employee (excluding the first 30 full-time employees). This means you will be charged $208.33 per month per full-time employee.
A lesser penalty, known as the tack-hammer penalty, applies if you offer insurance coverage but it fails to meet the ACA's standards for quality or affordability. In that case, you must pay $3,750 for each full-time employee (excluding the first 30 full-time employees) who obtains a subsidy on an ACA exchange. This comes out to $312.50 per month per eligible employee.
There is one exception to the tack-hammer penalty: the total amount you pay must not exceed the amount you would have paid for offering no coverage at all. This gives you a financial incentive to offer at least some type of minimal healthcare coverage.
The third type of penalty, the non-filing penalty, applies if you fail to properly document your compliance with the IRS. For failing to file the year-end 1095-C and 1094-C forms, you will face a minimum fine of $540 per eligible employee.
IMPORTANT NOTE: There have been rumors that the IRS no longer plans to enforce the ACA employer mandate with Trump in office, but the IRS has clearly indicated it will enforce all employer-mandate requirements.
What If I am Not Subject to the Employer Mandate, But Still Want to Offer Health Insurance to My Employees?
If you have fewer than 50 full-time employees, you can qualify for the Small Business Health Care Tax Credit (equal to 50 percent of the premiums you pay) if you offer group health insurance to your full-time employees and meet each of the following criteria:
● You have no more than 25 full-time employees
● You paid employees average annual wages of no more than $53,400 in 2018
● You pay at least 50 percent of the annual premiums for employees' health insurance
● You purchase the group policy through the Small Business Health Options Program (SHOP) marketplace.
Additionally, if you are eligible for the small business tax credit, you do not have to wait for an Open Enrollment Period – you can start offering SHOP coverage to your employees at any time of year.
What To Do Next
Compliance with federal law can be nuanced and can pose challenges for a business owner. Whether your company is mandated to comply with the ACA or you run a smaller operation and want to take advantage of the Health Care Tax Credit by offering group health insurance to your team, it is important to work with a business planning advisor who helps you navigate complex compliance issues.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.