The Affordable Care Act which is also known as “ObamaCare” was signed into law on March 23, 2010. Since it was signed into law, there have been many changes over seven years. It’s a law that has kept us in the payroll community on our toes over seven years. It is laced with tons of rules you need to follow to keep your employees safe and sound. Most payroll professionals navigating the waters of the ACA will spend an average of 13 hours per month with compliance issues says, “The National SBA.” NH Payroll services like ours work closely with small businesses to navigate the waters of this hefty piece of legislation.
What is the Affordable Care Act?
The Affordable Care Act is a law that is meant to help people that usually could not afford health insurance. It was intended to make healthcare insurance more affordable to everyone. This legislation affects small-business owners and self-employed business owners too. The mandate states that companies need to offer full and affordable insurance if they have fifty or more full-time employees. Not everyone has the same definition of what is affordable. Here’s what the ACA says:
“Affordability equals the cheapest single-person plan needs to have a premium that is 966 percent or less of an employee’s overall household income.”
If employers or employees don’t stick to the rules adopted by the ACA, then they will have to pay the penalty to the IRS at the end of the year. This IRS penalty is called “shared responsibility payment.”
How does the mandate apply to you?
To find out if ACA applies to you, you have to figure our how many FTE’s (full-time employees) you have in your business. Here’s the formula you will need to use:
(Total hours worked by part-time employees each week / 30) + number of full-time employees = YOUR FTE Number)
If you get a little stuck here’s a full breakdown. Walk through these steps to figure it out.
- How many hours a week do your part-time employees work? Add them all up
- Divide the result of #1 by 30
- Round down to the nearest whole number. Decimals aren’t important here.
- How many full-time employees do you have?
- Add the full-time employee number to your result in #3
- Now you just figured out what your FTE number is!
What if I don’t have 50 or more employees?
Don’t worry, if you have less than 50 employees you don’t have to provide health insurance coverage. Just because you don’t have to provide health insurance, doesn’t mean you shouldn’t. Many employees can’t afford health insurance on their own and look to the employer for assistance in health insurance.