Obamacare: What Small Business Owners Need to Know

What Your Small Business Needs to Do Under the Affordable Care Act.

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If your small business has employees, it’s time for you to start preparing to meet the requirements of the new federal health care law (officially, the Patient Protection and Affordable Care Act, but, less formally, Obamacare). There are at least four key dates within the next year that should guide your planning, as well as other important dates over the next two years.

September 23, 2012: First Day of Fall Enrollment

To the extent you are providing coverage to your employees through a group health plan, Obamacare requires you to provide a Summary of Benefits and Coverage (SBC) to your employees starting on the first day of the first open enrollment period that begins on or after September 23, 2012. In the case of employees who enroll in a plan other than during an open enrollment period (for example, new employees), the SBC must be provided on the first day of the first plan year that begins on or after September 23, 2012.

There are also certain formatting and content requirements for SBCs. In general terms, they should use 12-point font and conform to federal standards for bolding, shading, and certain other formatting. Summaries must also contain specific information in such areas as deductibles, out-of-pocket limits, networks and providers, services covered (including exceptions), services not covered, and statements about employee rights to continue coverage. Some of this information is to be contained within an “important questions chart.” In certain circumstances, a single summary may contain information about more than one plan. The Department of Labor (DOL) has published a sample SBC template, as well as basic instructions for filling in an SBC template with actual information about your plan or plans.

More generally, the DOL has published a detailed FAQ page on SBCs which includes links to relevant underlying federal regulations. Also, the various federal requirements related to SBCs have been codified in several places within the Code of Federal Regulations, including as IRS regulations, DOL regulations, and Department of Health and Human Services regulations. These various regulations have been published together as a single item in the Federal Register.

Keep in mind that in many cases the SBC will be prepared and issued to your business by the insurance company.

January 1, 2013: Deadline for Limiting Healthcare FSA Contributions

Some employers give their employees an option to have money taken out of their salaries and placed in a healthcare flexible spending account (healthcare FSA). Many of these healthcare FSAs fall under Section 125 of the Internal Revenue Code and are often referred to as cafeteria plans, because they allow employees to pick and choose among various items for which account funds can be used.

Section 9005 of the ACA limits the annual amount that an employee can have deducted from an employee’s salary and placed in a cafeteria plan; more specifically, the annual contribution may not exceed $2,500. (Section 9005 is available within a PDF file of the entire ACA published by the House of Representatives; access to individual titles of the law is also available through the federal healthcare.gov website.) Prior to the ACA, there was no statutory limit on healthcare FSA contributions.

The initial effective date for this limit on salary reduction contributions is January 1, 2013; the $2500 limit does not apply to plan years prior to 2013. Note that FSA salary reductions are based on plan years, and these are not necessarily the same as calendar years. Consequently, IRS Notice 2012-40, which provides guidance for this rule, indicates that the $2,500 limit becomes effective for plan years beginning after December 31, 2012.

For additional information on this deadline, including how to adjust employee contributions to cafeteria plans to meet the statutory requirement, and thus have employees avoid excess contributions that will be counted as part of their gross income by the IRS, refer to IRS Notice 2012-40.

2013: New W-2 Reporting for Employer-Sponsored Coverage

If you are not doing so already, starting in 2013 you will have to include information about the amount of employer-sponsored healthcare coverage in Box 12 of IRS Form W-2. As explained more fully in an IRS online guidance, the amount reported should include both the amount paid by the employer and the amount paid by the employee, as well as a special code (“DD”) to identify the amount.

The new W-2 reporting requirement is subject to so-called “transition relief” on existing 2012 W-2 forms, which makes reporting by certain employers--or on certain types of coverage--optional pending further guidance from the IRS. For more details on what is optional and what is not, refer to the helpful table of required and optional reporting areas contained in the IRS online guidance. Also review the IRS’s highly readable online question-and-answer page on the reporting requirements as well as IRS Notice 12-9.

Keep in mind that the IRS has indicated that the reporting requirements are subject to change, that changes will be announced through IRS Notices, and that you generally have up to six months after the Notice date to comply with a new reporting rule.

July 31, 2013: Initial Deadline for Filing Payment of Research Fees

Several parts of the ACA provide for a Patient-Centered Outcomes Research Institute (PCORI). The research conducted by PCORI is funded by fees collected from health plan issuers (insurance companies) and plan sponsors (employers). In turn, the IRS has drafted proposed regulations regarding collection of these fees, which are published in the April 17, 2012 edition of the Federal Register.

According to the proposed IRS Regulation, employers should use IRS Form 720 to file their fee payments, and the first potential deadline for filing a Form 720 that includes the research fee is July 31, 2013.

Section 46.4376–1 of the proposed Regulation focuses on the calculation of fees to be paid by employers and includes illustrative examples. In general terms, the fees are based on the “number of lives covered” by the plan (the number of covered employees, spouses, dependents, and other beneficiaries) multiplied by the dollar amount specified under the ACA (currently $1.00).

As the comment period for the IRS Regulation closed only a short time ago, additional guidance on this fee should be forthcoming from the IRS.

Other Important Dates and Information

Beyond the four dates addressed above, there are other important dates and issues worth considering, including:

  • August 1, 2012, first date on which some health plans need to provide preventive services for women
  • August 2012, first medical loss ratio (MLR) rebates are due; employers need to decide how to distribute them
  • 2013, increase in Medicare taxes and FICA taxes paid by high-income individuals (for the FICA tax increase, see Sections 9015 and 10906 of the ACA and this webpage from nyc.gov)
  • March 2013, certain employers must notify employees regarding availability of health insurance exchanges (see ACA Section 1512), and
  • 2015, the employer mandate (“Play or Pay”) takes effect—businesses with 100 or more employees must offer their full-time employees and their spouses and dependents health insurance or pay a penalty (see ACA Section 1513; concise information is available on a Capital BlueCross webpage). This provision was delayed for one year from its original 2014 date for all employers subject to the law (any company with 50 or more full-time employees). It was delayed an additional year until 2016 for smaller companies with between 50 and 100 full-time workers. 

This Nolo article includes information from an article by Attorney Ted Lewkowicz and an article published by ADP.

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