What are the requirements?

In general, most of the requirements under the Affordable Care Act (ACA) apply to large employer groups (50+ F/T equivalent employees).

  • Individuals – need to obtain Minimum Essential Coverage (MEC) beginning in 2014 or else they will have a tax penalty.
  • Small Employers –although small employers are not required to offer health coverage to employees, many small employers will be surprised to learn that they still have some obligations under ACA, even if they do not offer health coverage.

Tip 1: Small employers are required to adjust Medicare withholdings

Beginning January 1, 2013, ACA increases the employee portion of the Medicare Part A Hospital Insurance (HI) withholdings by .9% (from 1.45% to 2.35%) on employees with incomes of over $200,000 for single filers and $250,000 for married joint filers. It is the employer’s obligation to withhold this additional tax, which applies only to wages in excess of these thresholds. The employer portion of the tax will remain unchanged at 1.45%.

Tip 2: Small employers who do not offer coverage, still need to comply with some provisions of ACA.

Small employers that are subject to Fair Labor Standards Act (FLSA) must distribute a Notice of Coverage Options to all their employees on date of hire. FLSA applies to business enterprises with at least one employee and over $500,000 in annual dollar volume of business. There are two versions of the Notice of Coverage Options—one for employers who do offer coverage and another for employers who do not offer coverage. Model notices can be obtained on the Department of Labor EBSA website.

Tip 3: Individual Mandate in 2014.

Almost all individuals must have health insurance which is deemed to be minimum essential coverage (MEC). There is an exception for individuals who meet a very narrow definition of “financial hardship.” If an individual does not have MEC in 2014, a tax penalty which is the greater of 1% of household income or $95 per person ($47.50 per child under 18) with a family maximum of $285 will be assessed when tax returns are filed. The penalty amount will increase in subsequent years.

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