As the Affordable Care Act (ACA) continues to take effect, certain employers will need to decide if they should “pay or play.” This one-or-the-other scenario is a simple way to sum up the decision many businesses face under the Employer Shared Responsibility Provisions of the ACA. Should you provide your staff health coverage (play) or instead pay a tax penalty that goes towards funding the public health insurance marketplace (pay)?
Who does the Employer Shared Responsibility Provisions apply to?
The Employer Shared Responsibility Provisions went into effect this year, requiring businesses with 100+ full-time employees to chose whether to “pay or play.” Starting in 2016, employers with 50-99 full-time equivalent employees will also be required to choose one or the other.
If your business meets this criteria, you’ll face a big decision next year and beyond. With the right research and planning, you can make an informed choice that could potentially save your business thousands of dollars.
So should I “pay or play”?
In order to figure out the best course of action for your business, the first thing you must do is identify your full-time employees. Full-time employees are those working an average of 30 or more hours per week. You’ll then need to determine how many "full-time equivalent" (FTE) employees you have on staff. FTEs are calculated by adding all the part-time employee's hours and dividing the total by 30. If the sum of full-time employees plus full-time equivalents is more than 50, your company is subject to the Employer Shared Responsibility Provision for 2016.
The next step is to project the costs your company would likely spend on healthcare for your full-time staff. Start by taking a census of your full-time employees to determine who is covered under a spouse's or parent's plan (which excludes the employee from being covered under your plan). Then, ask the employees who are not covered if they plan on choosing health coverage under your company’s plan for the upcoming year. Once you have the number of interested employees, your health insurance broker can use this information to give you a projection of costs for your company.
Your company can use these projections to determine the most cost-effective way to offer your employees health coverage and comply with the ACA. If you decide to play, BookKeeping Express (BKE) provides services to help you onboard new hires and enroll them in benefits when they become eligible. If you decide to pay, you will need to make monthly payments to the IRS throughout 2016 based on the full time employees you have on staff. Most major payroll providers offer services to track full-time employees and submit the required reports to the IRS. If you don't currently work with a payroll provider, contact BKE and we'll help you get started.