MEC and MVP Strategies for ACA Compliance
WHO IS REQUIRED TO PROVIDE COVERAGE?
Generally, PPACA applies to employers with 50 or more full-time employees – those who average 30 or more hours per week. Employers are also required to provide so-called “minimum essential” and “affordable” coverage. Because of these general principles, many smaller employers aren’t paying attention to the laws because they have fewer than 50 full-time employees. However, there is more than one way to reach the 50-employee threshold.
Part-time employees are included in the 50-employee calculation as “partial employees” for determining whether the employer has 50 employees, so 50 employees really means 50 full-time equivalents (FTEs). For example, if a company has 25 full-time employees and 50 half-time employees, the company has 50 FTEs and will be subject to penalty if health care coverage isn’t provided. Given that many restaurants and hotels use part-time employees, the new laws may affect them.
In addition, some companies separately incorporate their restaurants and hotel properties for a variety of corporate and liability purposes. For purposes of the health care act in counting employees, IRS and ERISA controlled-group principles apply. Parent, brother and sister companies are counted as one. So, if two restaurants with 25 FTEs are separately incorporated but owned by the same company, person or other “controlled group,” those properties meet the 50-FTE employee threshold. Companies must carefully count the number of actual employees to see if the 50-FTE employee threshold is met.
As to the meaning of “minimum essential” and “affordable” coverage as defined under the Act, minimum means 60 percent of the actuarial value of the cost of the benefits. Affordable means the premium for the coverage paid by the individual employee can’t exceed 9.5 percent of the employee’s household income. Employers who meet the 50-FTE level will have to have very competent accountants to ensure the coverage offered meets the standards under these definitions.