Frequently Asked Questions 
- Are there requirements for all employers, whether or not they have to offer coverage?
- I heard there are small business tax credits available. When do they begin, and am I eligible?
- I heard that some health plans are considered “grandfathered.” What does that mean?
- If I have three restaurant companies, are they each considered separate employers under the health care law?
- Will I be required to offer health care to all my employees?
- Will small businesses be required to provide coverage too?
- What are the state exchanges?
- How do I know if I am considered a small business and therefore not subject to the employer mandate?
- Do I have to offer coverage for my part-time employees?
- How much will the new requirements cost me?
- If I choose to offer health care coverage to my full-time employees, how much will I have to provide?
- What is a premium tax credit?
- Are there penalties for employers subject to the law who don’t offer coverage?
- Are there penalties for employers who offer required coverage but it isn’t affordable to their employees?
- How will I know my employee’s household income to determine whether my plan is affordable?
- If I provide coverage, do I have to offer it to new full-time employees on Day One?
- What is the individual mandate?
Are there requirements for all employers, whether or not they have to offer coverage?
Yes, here are a few examples:
All employers will serve as a source of information for their employees. As of March 1, 2013, employers must inform employees about the existence of the exchange in their state and how employees can access it. Guidance will be issued about how and what must be provided.
Employers who offer health plans must begin reporting the value of employees’ health benefits on their W-2 forms. That rule takes effect for large employers (those who file 250 or more W-2 forms) for tax year 2012 W-2 forms, usually filed in January 2013. The IRS has said the reporting is optional for smaller employers until 2013 W-2 forms.
I heard there are small business tax credits available. When do they begin, and am I eligible?
Beginning Jan. 1, 2010, certain small businesses with up to 25 full-time-equivalent employees became eligible for a tax credit for contributing to their employees’ health coverage. The IRS has issued guidance and tools to help small employers determine whether they are eligible.
The tax credit is for employers with fewer than 25 FTEs and who pay at least 50 percent of the cost of coverage for their full-time salaried and hourly workers. This section of the law considers full-time employees to be those working at least 40 hours a week. The maximum small-employer tax credit ranges from 35 percent through 2013 to 50 percent after 2014. However, employers must purchase their coverage on the exchange after 2014 to be eligible for the tax credit. The amount of the tax credit is calculated by the number of employees and their pay. Employers with fewer than 10 FTEs and average salaries of less than $25,000 per FTE would qualify for the highest tax credit. Employers with more than 10 FTEs or average salaries greater than $25,000 are eligible for a credit reduced from the maximum based on size and salary. The IRS website includes extensive information on the credit and finding out if you qualify.
I heard that some health plans are considered “grandfathered.” What does that mean?
Grandfathered plans are group health plans that existed as of March 23, 2010, when the bill was enacted. The departments of Health and Human Services, Labor and Treasury have issued a temporary regulation, effective July 12, 2010, regarding what changes can be made to plans and maintain grandfathered status. The rule also lays out specific changes that will trigger a loss of status. Grandfathered plans are subject to some but not all insurance reforms imposed by the law on newer plans.
If I have three restaurant companies, are they each considered separate employers under the health care law?
Not necessarily. For the purposes of health care reform, a single employer is defined by the “common control” clause in the tax code [IRC Sections 414 (b), (c), (m), (o)]. Consult your tax adviser to see how the provision applies to you. If you are considered a single employer, all the employees must be combined together for purposes of calculating whether an employer is above or below the 50 full-time-equivalent threshold.
Will I be required to offer health care to all my employees?
Employers with 50 or more full-time-equivalent employees (see calculation below) will be required to offer their full-time employees and their dependents an affordable health benefits package starting in 2014, or they could be liable to pay penalties for not doing so. There's no definition yet for "minimum value" of a plan; see more below.
Part-time employees’ hours are considered solely for the purpose of determining whether a business is above or below the 50 FTE threshold. At no time does the law require employers to offer affordable coverage of minimum value or pay penalties for part-time employees.
Will small businesses be required to provide coverage too?
No. Employers who have fewer than 50 full-time-equivalents aren’t subject to the employer mandate. However, all businesses are required to do certain things, such as provide employees information about the exchanges and how to access them.
What are the state exchanges?
The law requires all states to open exchanges from which individual plans and small group plans may be purchased providing "essential health benefits" by 2014. They are envisioned as competitive marketplaces that would offer a variety of plans administered by private insurance companies. Generally, only employers with an average of fewer than 100 employees may purchase group policies on the exchange.
How do I know if I am considered a small business and therefore not subject to the employer mandate?
The threshold is determined by the following formula, which you would calculate on a monthly basis.
___ Number of full-time employees (defined as those who average at least 30 hours a week for that month).
+ ___ All hours worked by part-time employees that month ÷ 120 hours.
= ___ Number of full-time equivalents.
Do I have to offer coverage for my part-time employees?
No. Part-time employees (those working fewer than 30 hours per week on average) are counted only in determining whether an employer meets the 50 full-time-equivalent threshold for coverage under the law. The employer responsibility section of the law doesn’t require employers to offer health care coverage to part-time employees or pay health care penalties for them.
How much will the new requirements cost me?
Cost will vary depending on your operation and how affordable coverage of minimum value will be defined through the regulatory process. The Administration is currently writing these rules.
If I choose to offer health care coverage to my full-time employees, how much will I have to provide?
Employers subject to the law will have to provide affordable coverage of minimum value with at least a 60 percent actuarial value to meet the requirements of the law. "Minimum value" is being defined through the regulatory process right now. The National Restaurant Association is weighing in throughout the regulatory process on this and other issues.
What is a premium tax credit?
The law created a federal subsidy to be used by those with incomes up to 400 percent of the federal poverty level to obtain affordable coverage. The tax credit is used on the exchange to buy coverage to satisfy the individual mandate. The exchanges will play a central role in certifying individuals who are eligible to obtain the premium tax credit.
Are there penalties for employers subject to the law who don’t offer coverage?
Yes. Large applicable employers subject to the employer mandate can choose not to offer coverage to their full-time employees. However, if at least one employee uses a premium tax credit to access coverage on an exchange, the employer would be subject to a penalty of $2,000 per full-time employee annually (or $167 monthly).
Employers can exclude the first 30 full-time employees in calculating their penalties. For example, an employer with 70 full-time employees who chooses not to offer coverage and who has at least one employee who uses a premium tax credit on the exchange would face an annual penalty of $80,000, assuming a constant workforce. [Seventy total full-time employees – 30 full-time employees excluded from the calculation = 40; 40 x $2,000 penalty = $80,000.]
Note: The penalty is calculated on a monthly basis. Federal agencies haven’t issued regulatory guidance on how the penalty would be calculated or assessed.
Are there penalties for employers who offer required coverage but it isn’t affordable to their employees?
Yes. If an employer offers coverage to their full-time employees, but the employee's contribution is more than 9.5 percent of their household income, and that employee accesses coverage using a premium tax credit on the exchange, the employer is subject to a $3,000 annual penalty per full-time employee doing so (or $250 monthly). The maximum amount of penalty is limited so that it can not be any greater than what the employer would be liable for if they did not offer coverage at all. The Administration is currently writing the rules to define and administer this affordability test.
How will I know my employee’s household income to determine whether my plan is affordable?
You probably won't know their household income, nor would you want to. The National Restaurant Association has proposed a "safe harbor" based on W-2 or current wages to add prediability for employers. The Administration continues to consider our proposal. The exchange in each state, in consultation with the IRS, is expected to verify employees’ household incomes (wages and other taxable income, based on tax filings). The exchanges also would certify whether an employee qualifies for a premium tax credit or other government assistance.
If I provide coverage, do I have to offer it to new full-time employees on Day One?
The law limits waiting periods to no more than 90 days. For full-time employees whom you know will work an average of 30 hours per week over a month, an offer of coverage must be made by day 91. However, for employees with variable hours, the Administration is contemplating additional rules are being contemplated -- but no decisions have been made. The law also includes a mandate that requires employers of 200 or more full-time employees to auto-enroll full-time employees in company health plans but regulations haven’t been written on how this would work.
What is the individual mandate?
The individual mandate requires everyone to obtain minimum essential coverage for themselves (and their dependents) beginning in 2014 or pay a penalty. The penalty is phased-in to $695 per calendar year or up to 2.5 percent of income (as of 2016 and beyond). There are income exemptions. Only people under 30 can purchase catastrophic plans to satisfy that mandate; the law doesn’t allow employers to offer catastrophic plans and claim they satisfy the requirement for minimum essential coverage.
The requirement for individuals to obtain minimum essential coverage can be satisfied by participating in an employer-sponsored plan, purchasing individual policies, obtaining coverage under a state insurance exchange, or gaining coverage through Medicare, Medicaid or other governmental programs.
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