Penalties that noncompliant employers face under the Affordable Care Act may have been delayed until 2015, but that doesn’t mean companies should postpone crafting employee health care benefits that will pass muster under the new law, also known as Obamacare.
In fact, attorney Craig Kovarik said, there are steps small businesses should be taking now, including tracking employees’ hourly schedules to avoid penalties that must be paid by employers if the health coverage they provide isn’t affordable or doesn’t meet the federal government’s minimum essential standards.
Kovarik spoke to about 100 people who attended the Association for Corporate Growth’s panel discussion, “How will Obamacare affect your business?” Thursday night at Happy Hollow Country Club.
The new health care law requires companies with more than 50 full-time employees to offer affordable health care coverage to those full-time workers. Employees can accept or reject that coverage, but the key point is that compliant coverage must be offered to avoid tax penalties.
Kovarik, partner with Husch Blackwell in Kansas City, Mo., was joined by fellow panelists William P. O’Malley, director of Washington National Tax with McGladrey LLP in Peoria, Ill., and Dennis Kadel, vice president benefits division of the Miller Group, also of Kansas City, Mo.
In July, the Obama administration postponed the enforcement of the new health care law’s “employer mandate,” delaying reporting requirements and penalties for businesses with 50 or more full-time employees. As a result, potential tax penalties for not offering compliant health care benefits won’t take effect until 2015.
“Quite a few clients were lined up to do studies and, almost universally, clients decided to postpone the work, thinking something might come out of the political back-and-forth,” O’Malley said. Delaying “can be a big mistake for some employers, especially businesses that employ part-time and variable-hour employees,” he added.
Under the law, 30 hours a week constitutes full time, which could have a big effect on retail, restaurant, nonprofits and other employers that rely on part-time help.
When the corporate penalities go into effect in 2015, it is critical that companies be able to readily retrieve records documenting that they have offered employees affordable coverage, Kovarik said.
The Internal Revenue Service will be enforcing the penalties and when a company is notified by the IRS that their health care benefits may not be compliant, the burden of proof will fall on the employer, Kadel said.
Employers must be ready to show that they offered affordable, adequate health care benefits to 95 percent or more of their workforce or be prepared to pay nondeductible federal tax penalties that could cost thousands of dollars.
Kadel said the effort needed to avoid those penalties is going to be costly. “The burden it places on employers is expensive because of the extensive reporting requirements.”
During the 90-minute presentation, the three panelists discussed more than 20 rules intended to help companies navigate the intricacies of Obamacare.
And to help illustrate their points, the panel distributed a 12-page guide that covered more than 36 topics, including health coverage plan requirements, maximum-out-of-pocket limits — $6,350 for individuals and $12,700 for families — along with formulas to ensure affordable coverage for an employer’s lowest wage workers.
It is complicated, Kovarik said, but “most employer plans can be designed to avoid the employer penalties ... if you don’t delay.”