by Jennifer Anderson

The health care reform provisions take effect soon. A short update on the rules that apply to businesses are included below.

Penalty for Lack of Health Insurance

As we mentioned in July, businesses will face a penalty for failure to offer affordable health insurance plans to employees. Small businesses receive relief from this provision as it only affects large employers. The IRS defines a large employer as one that employs 50 or more full-time equivalent employees.

What exactly does full-time equivalent mean? A full-time equivalent is the number of employees determined by totaling the number of hours worked during the year by all employees and dividing by 2,080. If the number exceeds 50, your business may face penalties for failure to provide affordable health insurance.

The penalty was to apply in 2014, however the IRS has pushed back the start date to 2015. Use this additional time to comply with the requirements.

Notice to Employees of Coverage Options

All employers are required to notify employees of the coverage options available to them by October 1, 2013.

There are several items that must be included in the notice:

  • The existence of the Health Insurance Exchange, the services it offers, and how employees can contact the Exchange for assistance;
  • If the employer’s health plan (if any) fails to meet the minimum value requirement, the employee may be eligible for a premium tax credit;
  • If the employee obtains coverage through the Exchange, the employee will lose the employer’s contribution toward health benefits (if any) and the corresponding tax-favored treatment of that employer contribution

As the notices must provide specific information, the Department of Labor offers templates to ensure you include all required information. There are templates for employers who offer a health plan and for those that do not. The templates can be found at http://www.dol.gov/ebsa/healthreform/.

The business must provide at least 60% of the health plans total cost to meet the minimum value requirement. Coverage through the exchange is expected to begin January 1, 2014, and all employees must be notified of their health care options before then.

As they say, all good things must come to an end, and the delay in penalties won’t last forever. Start preparing now and don’t get caught up in the health care reform storm!