What EVERY Hotel Owner
MUST know about the
Affordable Care Act (ACA)
Presented by the Asian American Hotel Owners Association (AAHOA)
#1 What is the Timeline for the
Affordable Care Act?
2013
•
•
•
•
2013 information determines
“large” employer status for
2014
January 1st
Employers must report health
coverage cost on W-2s for 2012
October 1st –
Open Enrollment for individuals
in “exchanges”
Employers must notify
employees of “exchange”
coverage options
2014
•
•
•
•
January 1st
Small Business Access to SHOP
Marketplaces
Small Business Health Care Tax
Credit available
90 day maximum wait-period
instituted for new employees to
begin coverage
Penalties assessed for individuals
without health insurance
coverage
2015
•
•
•
•
January 1st
“Large employers” with 50 or more
FTEs penalized for failure to offer
affordable, minimum coverage
Employers must offer dependent
coverage
Employers with 200+ FTE must
automatically enroll new employees
into offered plans
Large employers have access to
“exchanges”
#2 Is my Business Required to Participate?
• ACA imposes penalties on
“large employers” who fail
to provide insurance to
their employees
• The ACA defines this
employer mandated
coverage as “shared
responsibility”
• A “large employer” is an
employer with 50 or more
“Full-Time Equivalent”
employees (FTE)
• “Small employers” are
employers with fewer than
50 FTE and are exempt from
penalties in the law
Full Time Employees and Equivalents
• A full-time employee is
an employee who
works an average of 30
hours per week or
more
• Seasonal employees are
not counted towards
FTE
• To determine the total
number of FTE, use this
formula:
Number of
Full-Time
Employees
+
Sum of the
hours worked by
all part-time
employees
120
#3 What will the ACA cost me as a hotelier?
• Large employers must provide
coverage options that are “affordable”
and have a “minimum value”
• Affordability
• An employee’s contribution to the
premium cannot exceed 9.5% of
household income for the taxable year
• Minimum Value
• Minimum value must meet specified
levels of generosity based on the plan’s
actuarial value
• An offered plan must pay at least 60% of
the covered health benefits
Can I keep my current plan?
Yes – but offered plans must
meet standards for minimum
value and affordability
#4 What are the Penalties for not
Complying with the ACA?
• Only large employers are subject to ACA penalties (50 or more FTE)
• Penalties
• Strong Penalty
• Employer failure to offer full-time employees the opportunity to enroll in coverage; AND
• At least one full time employee enrolls in an exchange
• $2,000 X the total number of FTE (minus 30)
• Weak Penalty
• Employer offers the opportunity for coverage, but the coverage does not meet the ACA’s
standards for affordability or actuarial value; AND
• At least one full time employee enrolls in an exchange
• $3,000 X (only) the number of employees who enroll in an exchange
#5 What is a Healthcare Exchange?
• Generally, an “exchange” is an online marketplace for the sale and
purchase of health insurance
• Individuals may access these marketplaces where insurance
companies may choose to sell insurance policies
• Coverage offered in exchanges will be comprehensive and meet all
applicable specifications prescribed by the ACA
• Plans offered through the exchanges will be certified as “qualified
health plans” or QHPs
Small Business Health Options Program
(SHOP) Exchanges
• Special exchange designed for small businesses to compare insurance
plans for employees
• 2014 – SHOP open to employers with 50 or fewer FTE
• 2016 – SHOP open to employers with up to 100 FTE
• Employers who use SHOP must provide coverage to all full-time
employees
• Employees may choose to enroll in SHOP plan or opt out and
purchase insurance on their own
• Some states have requirements for number of employees that must
enroll in the SHOP plan
#6 What if I own Multiple Businesses?
• If an employer has multiple
companies, each company may or
may not be considered separate
employers under the ACA
• Determining the total number of
full-time employees requires an
analysis of the “controlled group”
rules established in the Internal
Revenue Code (IRC)
• If a controlled group exists, then
the total number of employees
must be added to determine
“large employer” status under the
ACA
Types of Controlled Groups
• Brother-Sister
• Parent-Subsidiary
• Combination
Brother-Sister Controlled Groups
• A group of two or more businesses in which 5 (or fewer) common
owners own a “controlling interest” of the group and have “effective
control” of the businesses
• “Controlling Interest” – 80% or more of the stock of each
corporation (but only if the common owner owns stock in each
corporation)
• “Effective Control” – More than 50% of the stock of each
corporation counting the least of each owners share
Brother-Sister
Controlled Groups Example
Controlling Interest (Step 1):
• Is total ownership equal to
80% or greater?
Owner
B
30%
Owner
C
25%
Total
X Corp.
Owner
A
20%
Y Corp.
40%
10%
45%
95%
Z Corp.
20%
40%
25%
85%
75%
Effective Control (Step 2):
• Add the smallest interest each
individual owns in each
overlapping business. If that
combined interest is greater
than 50%, then a brother-sister
controlled group exists
Owner
A
X Corp. 20%
Owner
B
30%
Owner
C
25%
Total
75%
Y Corp.
40%
10%
45%
95%
Z Corp.
20%
40%
25%
85%
Parent-Subsidiary Controlled Group
• One business owns a controlling interest (80% or more) in at least one other
business
• “Chain Businesses” – same concept applies, a parent owns a subsidiary and the
subsidiary owns 80% or more of a second subsidiary
• Example:
• Corporation A owns:
• 90% of B Corp.
• 85% of C Corp.
• 65% of D Corp.
• A is a common parent of B and C Corporations and thus its employees will be
added together to determine “large employer” status under the ACA
Combination Controlled Group
• Each business is a member of either a parent-subsidiary or brother-sister
group; AND
• At least one corporation is the common parent of a parent-subsidiary and
is ALSO a member of a brother sister group
Combined Controlled Group Example
A owns:
80% of Y Partnership and
90% of Z Corp.
Y Partnership owns 85% of T Corp.
Y Partnership, Z Corp and T Corp are members of the same controlled group under
common control because:
(1) all three are members of a parent-subsidiary or a brother sister group; and
(2) Y Partnership is the common parent of T Corp. and a member of the Y
Partnership – Z Corp. brother-sister group
#7 Do owners and Family Members
Count as Employees?
• An owner is not counted if he/she is a sole proprietor, a partner in a
partnership, a shareholder owning more than 2% of an S corporation
or an owner of more than 5% of other businesses
• Family members are not counted if they are children or
grandchildren; siblings or step-siblings; parents or grandparents; stepparents; nieces or nephews; aunts or uncles; sons- or daughters-inlaw; fathers- or mothers-in-law; or brothers- or sisters-in-law
• Owners and family member hours and wages do not apply to the FTE
calculation
#8 What are the Reporting Requirements?
• The Department of Treasury expects to publish proposed rules
describing the reporting requirements for businesses later this
summer
• The complexity of the reporting requirements in these sections
contributed to the delay of the employer mandate to 2015
• Employers are required to provide employees with a standard
“Summary of Benefits and Coverage” form explaining what the
employers plan covers and what it costs
#9 Is my Business Eligible for Tax Credits?
• Businesses may qualify for employer health care tax credits if they have
fewer than 25 FTE employees who earn an average of $50,000 a year or
less
• To qualify for the Small Business Health Care Tax Credit, a business must
pay at least 50% of its full-time employees’ premium costs. There is no
requirement to offer coverage to part-time employees or to dependents
• Starting in 2014, the Small Business Health Care Tax Creditis worth up to
50% of your contribution toward employees’ premium costs
• The Small Business Health Care Tax Credit is highest for companies with
fewer than 10 employees who earn an average of $25,000 or less. The
smaller the business, the larger the credit
#10 Are there any Other Changes Expected?
• The Treasury Department will issue guidelines for employer reporting
during the summer of 2013
• The House and Senate are currently considering legislation that may
impact the law – stay tuned
• The Obama Administration has stated there will be no additional
delays in implementation of the ACA
What Resources are Available to Me?
• www.aahoa.com
• www.healthcare.gov
• www.sba.gov/healthcare
• www.irs.gov
• Be sure to consult legal counsel to review your personal situation
before making decisions on healthcare options for your employees