Under the Affordable Care Act (ACA), Applicable Large Employers (ALEs) are vulnerable to one of two potential employer shared responsibility penalty assessments. The “Subsection (a) Penalty” applies where the ALE fails to offer minimum essential coverage to at least 95% of its full-time employees (and their dependents) and at least one fulltime employee qualifies for a premium subsidy.
Alternatively, the “Subsection (b) Penalty” applies where the employer meets the 95% offer threshold but fails to offer minimum value, affordable coverage to a full-time employee and that employee then qualifies for a premium subsidy. Ensuring an offer of coverage is affordable, then, is critical to avoiding the Subsection (b) Penalty.
The Benefits Brief describes the three safe harbors that can be used to determine affordability according to the “Subsection (b) Penalty” described above – Federal Poverty Line, Rate of Pay, and W-2. ALEs should review this information on affordability safe harbors and ensure that the safe harbors are being used correctly. This is especially important if you have an employer-client using the W-2 safe harbor method. The IRS has increased its enforcement efforts and has taken a particular (and critical) interest in the accurate use of this safe harbor.
The Benefits Brief also provides additional information on the safe harbors and some example calculations.
Contact your Cowden representative for more information on this or other compliance issues.