Employer Shared Responsibility: Why Failure To Act Now Could Be Risky Business

Employer Shared Responsibility WHY FAILURE TO ACT NOW COULD MEAN RISKY BUSINESS PETE ADAM OWNER: OWNER: PETE'S PERFECT WIDGETS ADAM'S AWESOME WIDGETS EMPLOYEES: EMPLOYEES: 60 FULL-TIME 5 PART-TIME 40 FULL-TIME 20 PART-TIME BASED ON A 40-HOUR WORK WEEK BASED ON A 40-HOUR WORK WEEK NOVEMBER 2013 ete consults with his advisor, and it's clear: as an applicable large employer (ALE), he's subject to the I requirements of employer shared responsibility (ESR). dam glances over the requirements, but with the 1-year delay of ESR, assumes he has another year to act. Pete starts tracking his employees' hours. A year from now (with 12 months of hours-worked data) Pete can determine which Besides, Adam only has 40 full-time employees... employees are full-time (FT, as defined by ESR) before next year's open enrollment. APRIL '14 NOVEMBER '14 ete and his advisor evaluate his current group health plan, and amend it to meet the ith 12 months of data, Pete determines which requirements for affordability, minimum value, and employees qualify as FT and need to be offered to avoid potential penalties. Pete holds open enrollment for the 2015 plan year confident he's coverage minimum essential meeting ESR requirements. coverage (MEC). Adam realizes he's behind in preparations for ESR. First, Adam discovers that his total number of full-time equivalents (FTES) qualify him as an ALE. But without 12 months of hours-worked data, Adam doesn't know which employees need to be offered coverage to avoid potential penalties, or if his current offering meets adequacy requirements. ?? Adam starts tracking employee hours to prepare for the 2016 plan year. JANUARY '15 ete's group coverage starts. He focuses on his business, knowing he is in compliance with ESR. dam's group coverage starts, but he doesn't know if he's in compliance with ESR. MARCH '15 NOVEMBER '15 dam works with his advisor to complete the adequacy assessment, and finds out he ith 12 months of hours-worked data, Adam is needs to amend his current offering to meet ESR requirements. surprised to learn that six employees he thought were part-time should actually be considered FT (as defined by ESR). One of those employees opted to receive coverage through the health insurance marketplace and received a premium subsidy. Adam holds open enrollment with coverage options to meet ESR requirements. OWNER: ADAM'S AWESOM MARCH 16 46 EMPLOYEES: B FULL-TIM oth Pete and Adam file their tax returns for 2015 14 PART-TIM the 2015 tax year. 2015 APRIL 2016 ete meets all requirements of ESR and does not incur any penalties. ecause Adam did not meet the MEC offer test when he failed to offer six of his full-time D employees coverage (November '15), and one of them received a premium subsidy for going through the marketplace, he is assessed a penalty of... (46 FULL-TIME EEs - THE FIRST 30 EEs) x $2,000= 232000 PAYCHEX Payroll • HR • Retirement • Insurance LEARN MORE For definitions of Affordability, Applicable Large Employer (ALE), Full-time (FT) Employee, Full-time Equivalent (FTE), Minimum Value, Minimum Essential Coverage (MEC), Part-time Employee (PT), and Penalty as used above, visit http://paychex.com/health-reform/esr/glossary.aspx. DON'T WAIT To learn how Paychex can help your business navigate health care reform, in call 877-266-6850 or visit http://paychex.com/health-reform/. © 2013 Paychex, Inc. All rights reserved.