Today we’re going to clear up the hodgepodge of the Affordable Care Act (ACA) and give you a brief overview of the acronyms, rules, and reporting lingo that we believe you should know.
Hopefully, most of you have had the opportunity to listen to our Podcast on the impacts of the Affordable Care Act (ACA) on your restaurant. If you did, you’re well aware that the episode was laden with acronyms and terms you need to grasp in order to marginally understand the breadth of ACA.
Acronyms can be a great memory technique; that is until you have too many and can’t remember a single one. That pretty much sums up both the acronym use and variety of reporting within ACA terms.
We’ll start with an “easy” one…
What is the Affordable Care Act (ACA)?:
Also known as The Patient Protection and Affordable Care Act (PPACA) and generally referred to as Obamacare – the landmark health reform legislation signed into law by President Obama in March 2010, in which every citizen is required to have health insurance or face an income tax surcharge.
So what does ACA mean for you as an employer?
The ACA “employer mandate” i.e. Pay or Play:
A requirement that all businesses with 50 or more full-time equivalent employees provide health insurance to at least 95% of their full-time employees and dependents up to age 26, or pay a penalty to the IRS that is non-tax-deductible. Our friends over at Navigate HCR like to call this the Papa John’s Rule.
Commonality & Ownership:
Bill 414 states that employees of companies within the same controlled group must be combined to determine whether the commonly-owned companies are subject to the employer mandate. The IRS looks at the percentage of ownership you have in every company, regardless of the EIN (family member ownership included) – to determine your status.
Variable Hour Employee (VHE):
Employees with varying schedules depending upon employer needs (i.e. seasonality etc.).
Employees who work on average 30 hours or more per week over the course of a month (at least 130 hours over the month).
Full-Time Equivalent (FTE):
An employer defines its number of full-time-equivalent employees for a month by combining the number of hours worked by non-full-time employees (i.e. worked less than 120 hours of service per month, per employee), and divide the total by 120 – this is relevant to determining whether an employer is an ALE.
Lookback Periods for Determining FTE Status – Look @ 2 Scenarios:
6 month or 12 month look back period for total hours worked by employee
- Guidelines for a 6 or 12 month look-back period?
- Test both scenarios – It truly depends upon the movement of your restaurant(s); do you have more stores opening? Are you adding a significant amount of new employees? Does seasonality play a role in the changes? (movement can dictate cash flow)
Applicable Large-Size Employer (ALE):
At least 50 full-time and FTE employees on average throughout the year.
Applicable Mid-Size Employer (AME):
Less than 50 full-time and FTE employees on average throughout the year.
Summary Plan Document (SPD):
This is the document that the Department of Labor (DOL) looks at which outlines the plans you offer to your employees – there is a large fine per employee per day if you do not have verification that each employee has seen this document.
Minimum Essential Coverage (MEC):
Includes preventive care and wellness benefits only.
Minimum Value Plan (MVP):
A comprehensive health insurance plan that pays at least 60% of the costs of claims submitted by policyholders in the group.
ACA is quite a beast and the impacts it will have on your restaurant if you are not in compliance can, unfortunately, wreak havoc on your survival during these times of change.
Now keep in mind, we have only scratched the surface of terminology and reporting lingo necessary to glance into the Affordable Care Act. This week we will map out fines for non-compliancy, a calendar of need-to-know events, 1094 and 1095 forms, and finally, looking into different plan coverages.