Obamacare – Employer Penalties – Play or Pay
What Employers need to know about Obamacare- the Affordable Care Act of 2010, and plan for 2015…
Employer Play or Pay Penalty Delay Provides Time to Plan
“Beginning January 1, 2014, large employers will be subject to a “play or Pay” mandate under with they must either (1) play by offering full-time employees (and their dependents) affordable health insurance coverage of 92) pay a penalty.
Also under Affordable Care Act (ACA) enacted in 2010, large employers were to be required to file information returns to report the terms and conditions of the health care coverage provided to their full-time employees for the year.
However, by July of 2013, it became apparent that businesses needed more time to develop systems to assemble the data required to be reported. So, the IRS made the reporting requirement optional for 2014. Also, since without with information the IRS won’t be able to determine when an employer owes the play or pay penalty for 2013, it delayed the penalty until 2015. Note that the mandate still applies for 2014-there just isn’t any penalty. The IRS highly encourages voluntarily compliance for 2014.
Make the Most of This Extra Time
This delay is great news in that it provides employers sorely needed time. That said, it will be critical to use this time wisely by starting the planning process as soon as possible. It will take you a while to get your hands around this-it is chocked full of new terms, concepts, and complications and the penalties can be substantial.
Play or Pay Penalty-It’s No Small Thing
Beginning in 2015, a large employer may be subject to a play or pay penalty if either of the following apply:
1) The employer does not offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage. In this case, the potential annual penalty equals $2000 times the number of full-time employees over a 30-employee threshold. However, the penalty won’t apply unless a full-time employee receives a premium or cost-sharing subside through the Marketplace. However, it only takes one employee to trip the penalty for all the employees over the 30 employee threshold.
2) The employer offers minimum essential coverage, but it is unaffordable, or does not provide minimum value. In this case, the potential annual penalty equals $3000 for each full-time employee who receives a premium or cost-sharing subsidy through the Marketplace. However, the employer’s total penalty cannot exceed the penalty that would have applied if it had not offered minimum essential coverage.
Employers Subject to the Pay or Play Mandate
Only large employers-those that employed an average of 50 or more full-time employees (including full-time equivalents) on business days during the prior year-will be subject to the mandate.”
From: Catalog for Tax & Accounting Practitioners
Contact us, to discuss your business situation and how the play or pay penalty could affect your bottom line..