Thanks to our friends at NRF for the information on the employer mandate penalties under the Affordable Care Act.
Employer Mandate Penalties
1. How many full-time employees do you have?
- If equal to or more than 50, then your business is subject to the Affordable Care Act (ACA).
- If less than 50, ACA looks to part-time employees to determine full-time employee equivalents. If total full-time and full-time equivalent employees are equal to or more than 50, then your business is subject to ACA employer mandate provisions.
- If not, your business is exempt from ACA employer mandate penalty and coverage provisions.
- Multiple location businesses (e.g. franchised operations) are subject to consideration as one location if determined so according to IRS rules.
- Multiple businesses operated under different names but owned by one person are still considered a single business.
- Key considerations: How many employees do you have? If you are close to the 50 employee threshold, you might want to consider ACA applicability in determining future hiring decisions in advance of the January 1, 2014 effective date for employer mandate penalties.
2. What are the employer mandate penalties?
- Applicable employers can be penalized for (1) failing to offer coverage to full-time employees or (2) offering coverage to full-time employees where the cost of the coverage exceeds 9.5% of family income.
- The penalty for the failure to offer coverage is $2,000 x full-time employees not covered, minus the first 30 employees, i.e. your first 30 full time employees are exempt from the calculation.
- The penalty for the failure to offer “affordable” coverage is the lesser of two penalty calculations: $3,000 per applicable employee or $2,000 times every full-time employee, minus the first 30 employees.
- At least one employee must receive subsidized coverage in the exchange to trigger penalties.
- NRF maintains a Health Mandate Cost Calculator which can model the penalty effect on your business.
- Key considerations: What is your mix of full and part-time employees? Could an adjustment of employee status reduce your penalty exposure? If you provide coverage today, how does the cost of that coverage compare to your total penalty exposure? Might it be less expensive to pay the penalty?
Note that the ACA will make substantial changes to coverage through the essential health benefits benchmarks in the new health insurance exchanges and outside market and through additional market mandates and minimum value calculations for self-funded plans. Coverage costs are likely to increase for most employers, though it is hoped that some economies will be found in purchasing through the exchanges for eligible small employers and individuals.
Nevertheless, there is a longstanding relationship between employment and health coverage and employee and public relations to consider. NRF encourages the Retail Industry to carefully consider all their ACA-related options and to consult with us as needed.
 Defined as 30 hours per week on average.
 Total part-time hours in one month divided by 120 equals full-time employee equivalents (FTEEs). Important – you cannot be penalized for FTEEs: it is only relevant to applicability.
 Equal to or more than 50 full-time employees or full-time employee equivalents.
 “Family income” is difficult if not illegal for employers to know. One possible safe harbor may be to consider the employee’s W-2 wages as a proxy for family income.