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Low-Wage Employees Fall Through ACA Gap

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Small businesses may be concerned that adding employees to their health plan will put them under, yet research reveals that their actual costs are far less than anticipated because many employees are declining coverage completely.

Several months after the Affordable Care Act’s (ACA) employer mandate took effect, business owners with 100 or more employees, who must offer health insurance to full-time employees, are finding that very few of those employees are willing to buy health coverage. This trend is especially prevalent among smaller and midsize businesses with low-wage hourly workers.

“Affordable” is a relative term

The ACA has reduced the number of uninsured Americans; around 14 million adults have gained coverage in the last two years, but most of that is a result of Medicaid expansion and ACA subsidies that provide insurance through state or federal exchanges.

For low-wage earners, an employer-sponsored plan that is deemed “affordable” still can seem out of reach, which explains why many are choosing to decline coverage.

For some tipped employees making $2.13 an hour plus tips, paying $65 every two weeks for insurance is a significant hit.

However, those who choose to decline coverage through an employer-sponsored plan must qualify for subsidies in order to purchase insurance through a state or federal exchange.

Under the ACA, employees are eligible to pursue health insurance through the marketplace exchanges only if they fall between 100 and 400 percent of the federal poverty level and their employer either offers unaffordable insurance or doesn’t offer it at all.

What is “affordable?”

According to ACA guidelines, determining whether a company’s insurance is “affordable” is based on two main questions:

  • Does the plan pay at least 60 percent of covered health costs?
  • Must an employee pay more than 9.5 percent of W-2 income for self-only coverage?

Even though small to midsize employers see such a small rate of return on the coverage they offer, they must continue to comply with ACA provisions by offering affordable insurance or face steep fines for noncompliance.

Companies that fail to offer affordable coverage could be fined an annual penalty of up to $3,000 per full-time employee receiving a credit or subsidy, or $2,000 per total number of full-time employees, not counting the first 80, whichever is less. For many businesses, paying a fine this big is unaffordable.

The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only.  It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.


Tiffany Hill

by Tiffany Hill


Author Bio: Tiffany Hill is an experienced employment and labor law attorney who currently serves as Paycom’s HR Legal Advisor. She maintains professional memberships in the Oklahoma, Ohio and Louisiana Bar Associations and is an active member with the Society for Human Resource Management and the National Association of Professional Women. In addition to her Juris Doctorate, Tiffany holds degrees in Civil Law and Political Science. In her spare time, Tiffany enjoys spending time with her three young sons and cultivating aspiring leaders through mentorship programs.

ACA ‘Cadillac Tax’ Delayed to 2022

ACA ‘Cadillac Tax’ Delayed to 2022

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The short-term spending bill that ended the government shutdown on Jan. 22 included a small provision that again delayed the Affordable Care Act’s (ACA) “Cadillac tax,” now to 2022.

So nicknamed because it targets employer-sponsored health plans with the most generous level of benefits, the Cadillac tax originally was to take effect in 2018. In 2015, the effective date was pushed to 2020, and now the new bill pushes the effective date two additional years into the future.

When – or if – the Cadillac tax goes into effect, it will impose a 40% excise on the cost of employer-sponsored health coverage exceeding a certain dollar value per employee. The dollar value would have been $10,200 for individual coverage and $27,500 for family coverage in 2018, had the tax not been delayed. The law calls for the amount to be adjusted annually with growth in the consumer price index.

How does this affect Employers?

Employers do not have to contend with the tax for an additional two years. The IRS has not yet issued regulations addressing implementation; with this additional delay, the agency likely will not do so in the near future.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

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Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Deadline Extended

Employer Deadline Extended for Furnishing 2017 ACA Forms

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Distribution of 2017 Affordable Care Act (ACA) Forms 1095-B or -C to your employees has been extended.

As issued in Notice 2018-06, the IRS has extended the deadline from Jan. 31 to March 2. (However, the deadline to provide Forms W-2 and 1099 to employees and contract workers remains as Jan. 31.)

Filing deadlines unchanged

While the deadline to furnish forms was extended, the filing deadlines remain the same: Feb. 28 for paper forms, and April 2 for electronic forms.

IRS Notice 2018-06 emphasizes that employers who do not comply with the due dates for furnishing or filing are subject to penalties under sections 6722 or 6721.

Good-faith transition relief extended

The IRS also announced the extension of good-faith transition relief. This may allow an employer to avoid some penalties if it can show that it made good-faith efforts to comply with the information reporting requirements for 2017.

This relief applies only to incorrect and incomplete information reported on the ACA forms, and not to a failure to file or furnish the forms in a timely manner. Additionally, the IRS stated it does not anticipate extending either the good-faith transition relief or the furnishing deadline in future years.

Contact a trusted tax professional if you have questions on how this may affect your business specifically.

Click here to read more about how the ACA is affect by the new Tax Cuts and Jobs Act.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Tags: , , , ,
Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

Employers Unaffected by ACA Changes in New Tax Law

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On December 22, President Trump signed the Tax Cuts and Jobs Act. The bill includes a provision that reduces the penalty for not complying with the Affordable Care Act’s (ACA) individual mandate to $0, effectively removing the penalty for individuals who do not have health insurance coverage after the effective date of Jan. 1, 2019.

However, this update will not impact employers, since the law does not remove the employer mandate (the requirement that large employers offer health insurance coverage to their full-time employees or pay a penalty) or the associated employer reporting requirements. Large employers subject to the mandate still face penalties if they fail to comply with either, and the IRS has begun sending out notices with preliminary assessments of the employer shared responsibility penalty for tax year 2015.

Employers subject to the employer mandate should continue to comply and be prepared to file Forms 1094 and 1095 with the IRS in accordance with the normal deadlines.

For the 2017 tax year, the deadlines to provide Forms 1095-C to employees is Jan. 31, 2018.  The deadline to file Forms 1094-C and 1095-C with the IRS is Feb. 28, 2018 if filing paper forms, and April 2, 2018, if filing electronically.

Disclaimer: This blog includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal problems.

Posted in ACA, Blog, Compliance, Featured

Erin Maxwell

by Erin Maxwell


Author Bio: As a compliance attorney for Paycom, Erin Maxwell monitors legal and regulatory changes at the state and federal level, focusing on health and employee benefits laws, to ensure the Paycom system is updated accordingly. She previously served as assistant general counsel at Asset Servicing Group in Oklahoma City. She holds a bachelor’s degree from the University of Central Oklahoma and a J.D. from the University of Oklahoma. Outside of work, Maxwell enjoys politics, historical mysteries and spending time with her family.

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