January 5, 2016

Group Health Insurance for Business

Affordable Care Act (ACA) employer mandate now (as of 01/01/2016) requires businesses with at least 50 full-time equivalent employees to provide health coverage for their employees and dependents or face a tax penalty. Many clients in the service industry have asked me “what constitutes a Full Time Equivalent?”

Here is the definition directly from the IRS –

Full-time Employee

A full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month, or at least 130 hours of service during the calendar month.
Full-Time Equivalent Employees

An employer determines its number of full-time-equivalent employees for a month in the two steps that follow:

  1. Combine the number of hours of service of all non-full-time employees for the month but do not include more than 120 hours of service per employee, and
  2. divide the total by 120.

The other significant change that occurred on January 1, 2016 is that  the definition of a small business in California has expanded to include groups with 1-100 full-time equivalent (FTE) employees.

Covered California for Small Business has expanded its eligibility requirements to allow small groups with 1-100 FTE employees to join the program as of January 1, 2016. This “small business expansion,” in combination with the ACA’s employer mandate, means that many businesses may be shopping for coverage for the first time.  If a group’s FTE number is at least 50, the employer will be required to offer coverage to all dependent children up to the age of 26. If the employer chooses to not offer dependent coverage, the employer may be subject to tax penalties under the IRS Employer Shared Responsibility Provisions.

Remember, 01/31/2016 is the deadline for open enrollment in 2016.

Please give us a call if we can help answer any questions for you!