Texas CEO Magazine September|October 2014 | Page 12

ACA update

DEPT

by Felicia Finston

ACA BASICS
Demystifying the
Language of the ACA

With all of the confusion and controversy
regarding the Affordable Care Act (ACA),
sometimes called “Obamacare,” the title
of this article may seem like a tall order.
However, from an employer perspective,
deciphering the ACA is not as difficult as it
would seem.
For 2015, the primary ACA compliance issue employers will face concerns the
employer mandate also known as “pay or
play” which generally requires employers
who employ 50 or more full-time or fulltime equivalent employees (Large Employers) to determine if they are going to provide
health coverage to employees and satisfy the
requirements of the ACA, or if they are not
going to offer coverage and instead pay a
penalty.
Determining Large Employer Status
Being a Large Employer is determined
on a controlled group basis, meaning the

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employees of related entities as defined by
the Internal Revenue Code (referred to as
a Controlled Group), are combined. Thus,
four related entities that are members of the
same Controlled Group who only employ
20 full-time employees each will be a Large
Employer for purposes of ACA.
A full-time employee means an employee who regularly works 30 or more hours a
week. However, for purposes of determining
Large Employer status, part-time employees are converted into full-time equivalent
(FTE) employees. This means an employer
cannot evade the employer mandate by only
employing part-time employees.
For 2015 certain transition rules apply
which allow employers with 50 to 99 FTEs
to avoid the pay or play penalty. Generally,
mid-size employers with an average of 50
to 99 FTEs will not be subject to the pay or
play penalty until 2016 if the work force or
overall hours of service of employees are not

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reduced or health coverage is not materially
reduced or eliminated between February 9,
2014 and December 31, 2014.
What’s Required For Large Employers to
Offer
Large Employers are required to offer
minimum essential health coverage (MEC)
under a group health plan to substantially
all full time employees (70 percent for 2015
and 95 percent for 2016 and after) and their
dependents, or pay a penalty. Most employer group health coverage constitutes MEC.
However, for purposes of the employer
mandate, such coverage must satisfy two
requirements:
(i) it must be affordable (i.e., single
coverage cannot cost more than 9.5 percent
(or the adjusted percent specified by the
Internal Revenue Service) of the employee’s
household income), and
(ii) it must satisfy minimum value