WHAT EMPLOYERS UNDER 100 SHOULD BE DOING NOW!

About half way through the 2015 calendar year, employers are approaching the first required reporting cycle under Section 6055 and 6056, and several other changes on the horizon for 2016. This is especially true for employers that can be called both ‘large’ and ‘small’ depending on which of the myriad mandates at issue.

Take a hypothetical California employer with 48 full time employees, and 12 part time employees who each work 25 hours per week. If we were talking about group size in the insurance market, in 2015 this would be a ‘small’ employer, as less than 50 employees are eligible for coverage. However, in the Applicable Large Employer (ALE) context, this is employer is ‘large’ (over 50 FT and FTE employees when using the ACA formula). And to further complicate things, come 2016, this employer loses their ‘small’ group status in the market because the same formula used to determine ALE status under the ACA will now be used to determine group size in the market as well. FTEs are counted by aggregating hours of service worked in a month by all employees who average under 30 hours of service per week (but not exceeding 120 hours/month for any single employee), and dividing the total by 120. For example, 10 part time employees averaging 15 hours per week would result in 5 FTEs.

Employers with headcounts hovering near 50 or near 100 should ensure they have the proper true counts on file. All counts are based on business days in the prior calendar year. So to determine an employer’s stats as an ALE or ‘small’ or ‘large’ group in 2016, the average headcount for all business days in 2015 would be used. As a reminder, all employers with 50 or more FT and FTE (as measured in 2014) will need to file forms 1094-C and 1095-C in early 2016, regardless of the 4980H transition that may apply based on their size.

As a reminder we are here to help you not only navigate these ACA challenges but help you build a short and long-term strategy to meet your business needs.

Call us anytime at 800-234-6787

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Heffernan Employee Benefits Legislative Updates and Employer HR Alerts are published as an information source for our clients and colleagues. It is general in its nature and is not intended to be and should not be used as a substitute for specific legal advice.

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