"Do I have to give health insurance to my employees?" you may worry as a small business owner.
Applicable large employers (ALEs) with 50 or more full-time equivalent workers (FTEs) are obliged to provide affordable health benefits that fulfill minimum essential coverage (MEC) or face a penalty under the Affordable Care Act (ACA). Smaller enterprises, on the other hand, are not bound by the same rules. In this post, we'll go through employer health insurance regulations, such as how to figure out whether you're an ALE, how to calculate FTEs, and what the ACA requires for businesses with less than 50 employees.
What exactly is an ALE (applicable large employer)?
Any business with at least 50 full-time employees qualifies as an ALE. An FTE is defined by the ACA as someone who works at least 30 hours per week or 130 hours per month.
On a calendar year basis, your company is classified as an ALE. For example, if you lose certain staff, you might be an ALE one year but not the following. Typically, an employer is deemed an ALE for the next calendar year if it has a monthly average of at least 50 full-time equivalent employees during the previous calendar year.
If any of the following apply to your company, it is not an ALE:
- During the preceding calendar year, you employed less than 50 full-time employees on average.
- Due to a seasonal workforce, you employed more than 50 full-time employees for no more than 120 days in the preceding calendar year.
- Because of the employer mandate, ALEs must provide health insurance to their full-time employees and their families or face a tax penalty.
- Taking into account full-time and part-time staff
You must include all FTEs, as well as the full-time equivalent of your part-time employees, to assess if your company is an ALE.
The calculations are straightforward for the vast majority of businesses:
- Full-time employees are those who work at least 30 hours per week on average during a given month.
- All of your full-time employees must be counted.
- Full-time equivalents are as follows:
- Add up the total number of hours worked by part-time employees in a particular month, then divide the total by 120 to get the full-time equivalent of all your part-time employees.
If the total after your calculations is 50 or more, your business is designated as an ALE, and you must comply with the Affordable Care Act's obligation to supply health insurance.
Health insurance regulations for small businesses
Small firms with less than 50 workers are not required to provide health insurance coverage to their employees or face a tax penalty under the Affordable Care Act. That isn't to say they shouldn't give health insurance coverage.
Here are some of the benefits of providing health insurance:
- Recruiting and maintaining outstanding performers
- assisting your company in standing out from the crowd
- Creating a more healthful workforce
- During tax season, you should save extra money.
The Inexpensive Care Act (ACA) does not define what type of health insurance small companies can provide their employees as long as it is affordable and fulfills MEC requirements.As a result, companies might explore a number of non-traditional health insurance solutions, such as a health reimbursement agreement, in addition to group health insurance (HRA). Many businesses prefer HRAs to group health insurance because they are less expensive and offer tax benefits. Employees can get reimbursed for their insurance premiums and other eligible medical expenditures through HRAs like the qualified small employer HRA (QSEHRA) and the individual coverage HRA (ICHRA). Overall, even if you aren't legally required to provide health insurance, it may be a beneficial investment for your small business.
Insurance options for employees of small businesses
Individuals who do not have insurance now face no penalties. If you're not an ALE and don't offer health insurance, your employees have the option of purchasing their own individual coverage. Employees can buy their own health insurance, and you can provide them with an HRA as a bonus benefit.
Individuals who wish to purchase their own health insurance can do so through the federal marketplace, a local broker, or a state exchange. Individuals can start a new insurance during open enrollment, which is the most convenient period for them. An employee may be eligible for a special enrollment period if they have a qualifying life event, such as losing their existing health coverage, getting married or divorced, having a baby, or moving.
Conclusion
Keeping up with the laws and requirements of health insurance may be difficult for small company employers. While organizations with 50 or more employees must provide eligible health coverage or face a penalty, smaller businesses are not required to do so. Offering health benefits, on the other hand, is one of the finest investments that small company owners can make. Consider an HRA if you're an ALE searching for a high-quality, tailored health-benefit option. Make an appointment with a PeopleKeep tailored benefits adviser to learn more about how we may assist you in obtaining a customized health coverage.