Preparing for implementation of the new law
Editor’s note: At The Rental Show 2013 in Las Vegas, the American Rental Association (ARA) produced a seminar entitled “Healthcare 101 for Your Rental Business: What You Need to Know to Implement the Law of the Land” as part of the Sunday educational seminars. The entire one hour and forty-five minutes allotted for the session was consumed by a lively discussion between and among the panelists and attendees about the requirements and implications of the Affordable Care Act (ACA). Because the subject matter of this seminar is so important, ARA recorded it in its entirety and has made the video and related slides available online under “Business Resources” in the “Members” tab at ARArental.org. There is so much to know about this issue that it is difficult to present everything in just one forum or article. ARA’s goal is to answer as many questions as it can about how rental businesses will be affected by the ACA. As we move through 2013, ARA plans to break down the provisions of the law to help rental stores plan for compliance. This month’s article focuses on counting your employees to determine if you are subject to ACA mandates and what the term “affordable” means.
When preparing to comply with the Affordable Care Act (ACA), the first question every rental business needs to ask is, “How many employees do we have?” For many rental businesses, this should be an easy question to answer. Either you clearly have more than 50 employees or you have far fewer than 50 employees. The number 50 is important because that is the number that will determine if you are subject to the employer penalties of the ACA.
Rental companies that have to pay attention to the methods of calculating their number of employees are those who are right on the line. If a rental store employs several seasonal or part-time employees, sometimes the company has fewer than 50 and sometimes more. Those rental businesses in this gray area will need to learn and follow the rules for determining employee numbers because that will determine if the company has a relatively easy path to complying with the ACA or if it is subject to penalties for not offering insurance or for not offering affordable insurance. The basic rules are as follows:
- An employee who works at least 30 hours per week is a full-time employee.
- To find out how many full-time equivalents (FTE) a rental company has from part-time employees, add all of the hours they work and divide by 30.
- If a company’s full-time employees and FTEs is greater than 50, it is subject to the employer provisions of the ACA.
- In 2013, businesses are allowed to look back and use any continuous six-month period during the year to determine if they have more than 50 employees.
ARA suggests that rental stores begin looking at this calculation as soon as possible to understand how to make it and to determine whether the calculation is correct. It is important to note that if a rental company owns more than one business entity, there are rules that require the company to count all of its employees as if there is only one business for the purposes of the ACA. For example, if you have a rental business with 30 employees and a retail clothing business with 25 employees, you have 55 employees for the purposes of the ACA. It is recommended that you check with an employee benefits consultant to understand the common control rules.
If a rental company has more than 50 employees, it is subject to the requirements of the ACA. This means it must offer “affordable” health insurance to full-time employees. The company also must offer health insurance to full-time employees’ dependents, but the insurance does not have to meet the affordability standard. Spouses are not considered dependents in this case. “Affordable” means that the employee does not have to pay more than 9.5 percent of their income as their share of the cost of their health insurance. So if a rental company pays an employee $10,000, the employee cannot pay more than $950 in insurance premiums or their insurance is considered not affordable and the employer is subject to a penalty. However, if the employee buys a plan that costs him less than $950, but decided to insure his children as well and the additional cost causes his total payment to exceed $950, this is not a violation of the affordability provision.
There are two basic penalties that employers with more than 50 employees can be assessed.
- If a company has more than 50 employees and the company does not offer employees and their dependents access to health insurance, the company must pay a penalty of $2,000 per employee after the first 30 employees. For example, an employer with 51 employees who does not offer insurance will pay a $42,000 penalty for the 21 additional employees.
- If the company’s coverage to full-time employees is not affordable, the employer has to pay either $3,000 for each employee who has to pay more than 9.5 percent or $2,000 for each full-time employee past the 30-employee exemption, whichever is less.
If a company has more than 50 employees as defined by the ACA, the company is required to meet the ACA mandates to offer affordable health insurance to full-time employees and their dependents (spouses are not dependent). Failure to offer coverage to a company’s full-time employees and their dependents or failure to offer full-time employees affordable coverage will subject the company to penalties.
Remember, companies are only required to offer insurance to full-time employees and their dependents. Companies are not required to offer insurance to part-time or seasonal employees. Beyond that, companies only have to offer affordable insurance to full-time employees; the insurance offer that includes the employees’ dependents does not have to meet the affordability requirements of 9.5 percent of income.
Next month’s article will explore the definition of what is meant by minimum credible coverage or minimum benefits packages. The structure of plan coverage and the minimum coverage that is required will have a material effect on the affordability issue. The ACA will prohibit the sale of health plans that do not meet the minimum coverage requirements. These rules are currently being written, but many industry experts are concerned that certain high-deductible plans that are currently on the market and the use
of health savings accounts will be radically curtailed.
The ACA is comprehensive and complex and it is the law. Planning an ACA compliance strategy now will ensure that rental businesses can focus on what they do best — renting equipment.
Healthcare 101 online
Educational seminars at The Rental Show offered insight into various government regulations and policies. Healthcare 101 For Your Rental Business: What You Need to Know to Implement the Law of the Land, led by John McClelland, vice president of government affairs, American Rental Association (ARA) and E. Neil Trautwein, National Retail Federation, Washington, D.C., was of particular interest as the 2014 deadline for full implementation of the law looms closer. In addition, Marcy Johnson, CPA, ARA controller, offered the perspective of a small business, relating how she will address the law in her administration of human resources. The seminar covered several aspects of the new law, including compliance and changes in coverage, and concluded with an extensive question and answer session.
The ARA’s recording of this seminar is available online under “Business Resources” in the “Members” tab at ARArental.org. The recording is free for all rental companies with full registration to The Rental Show 2013 as well as for exhibitors. ARA member companies that did not attend the show will be charged a $25 fee to access the recording and those with nonmember companies that did not attend the show will be charged $50.