Monday, November 17, 2014

ACA Large Employer penalty goes into effect Jan. 1, 2015

The Patient Protection and Affordable Care Act's (PPACA) large employer penalty goes into effect on January 1, 2015 for some employers. The IRS issued regulations just a few months ago allowing for a phase-in period for some large employers, which are also known as the transition rules. These rules state that employers with fewer than 100 full-time equivalent employees (FTEs) or fewer than 80 full-time employees are exempt for 2015 from the large employer penalties. Beginning in 2016, the number of employees will drop to the statutory requirements of 50 FTEs and 30 full-time employees.

A FTE is calculated by adding all part-time employees' hours (employees working less than 30 hours a week) and dividing by 30 and adding all of your full-time employees to your number. Here is an example: 

Employer A has the following employee make-up:
  • 50 employees working at least 30 hours per week (50 FTEs)
  • 10 employees working 20 hours per week (10 x 20/30 = 6.67 FTEs)
  • 40 employees working 15 hours per week (40 x 15/30 = 20 FTEs)

This employer would be deemed to have 76 (50 + 6.67 + 20) FTEs

For 2015, there would not be any large employer penalty issues. However beginning in 2016, Employer A could be subject to a non-deductible penalty up to $40,000 annually.

There are many considerations in determining whether or not employers should offer coverage, whether hourly employees are full-time or part-time and the kind of coverage(s) to offer.

In order to assist employers, Bourgeois Bennett, LLC is hosting a complimentary seminar Tuesday, Nov. 18, 2014 from 9-11 a.m. To RSVP, call Becky Kearns at (504) 831-4949.

If you have questions, call Stephen Blitz at Bourgeois Bennett's New Orleans office.

Disclaimer: This eBulletin contains general information and cannot substitute for individual consultation. You should obtain professional advice before making financial business or tax decisions.

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