Small Businesses Tax Credit

As employers with 50 or more full-time employees (or their equivalent) prepare for the regulations of the employer mandate, some small business owners are also considering offering coverage to their full-time employees. Despite the employer mandate not applying to small businesses with fewer than 50 full-time employees (or their equivalent), the federal government has implemented tax credits as an incentive for small businesses to offer health insurance to their full-time employees. Offering health insurance for small businesses is costly. The Obama administration hopes tax credits alleviate some of those costs. Employers with fewer than 25 full-time employees or their equivalent may be eligible to qualify for a Small Business Health Care Tax Credit under the Affordable Care Act. Since January 1, 2010, small business owners have been eligible to qualify for up to a 35% tax credit. Beginning in 2014, tax credit rates will increase up to 50% of an employers’ contribution to health insurance premiums.

There are 4 requirements an employer must meet in order to be eligible to qualify for tax credits:

• Employ fewer than 25 full-time employees or their equivalent.
• Annual average wages of each full-time employee (or equivalent) is about $50,000 or less.
• Cover at least 50 percent of full-time employees’ health care costs.
• Offer health coverage from the Small Business Health Care Program (SHOP) Exchanges.

When counting employees to qualify for tax credit, business owners with part-time workers should combine their part-time employees to equal full-time equivalent employees. For instance, if an employer has 20 part-time employees, working 15 hours on average each, then those employees are equivalent to 10 full-time employees. If an employer has 50 part-time employees, working 15 hours on average each, then that employer is not eligible for a tax credit because their full-time equivalent count is 25. As you count your employees, sole proprietors, partners in a partnership, two percent or more owners of S-Corps,or any five percent or more business owners (for tax credit purposes only) are not included in your total count of fewer than 25 full-time employees or their equivalent. If you have any questions on tax credit or need help determining if your business may be eligible to qualify for tax credits give us a call. We will gladly guide you. 

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

To Offer to Spouse, or Not to Offer

According to recent news, United Parcel Service Inc. (UPS) has announced it plans to drop health care benefits for thousands of spouses starting in 2014. In a memo to their employees, UPS accredited the cuts to the high costs of the Affordable Care Act along with the increasing coverage costs for chronic diseases and other health conditions.

The spousal coverage drops are expected to affect about 15,000 spouses, which is a little less than half of the 33,000 spouses who are currently covered by their health care plans. However, UPS clarified that the changes will only apply to those spouses who are employed elsewhere and that are eligible to receive coverage from their own employers. Furthermore, out of UPS’s 322,000 employees, about 250,000 belong to a union. Under bargaining agreements, UPS will continue need to offer coverage for covered employee spouses regardless of the latter’s employment. Whereas, nonunion workers will no longer have the option to cover their spouses through UPS health care plans. This divide between union and nonunion workers could potentially generate a contentious work environment that essentially highlights differentiating health care value among workers.

In light of this news, it is understandable that you may have potential concerns about your own health care plans regarding spousal coverage. If you are an employer who currently offers coverage to spouses, you must first understand that you are under no obligation under the Affordable Care Act to do so. Nonetheless, since you do offer coverage, your company is at an advantage when it comes to attracting better candidates. The employer mandate has probably caused you to reassess your coverage plans. Before you make a final decision to drop or continue spousal coverage, you should evaluate your particular situation. Specifically, you want to focus on your industry, your finances, and the skill level of your employees.

For example, let’s say a company currently offers spousal coverage in an industry that requires most of their employees to have a college education. Additionally, the company is in an industry that is traditionally accustomed to offering spousal coverage to remain competitive and to attract highly qualified workers. 

Though the company wants to remain competitive in the industry, continuing to offer spousal coverage could be financially impossible. In this situation, the company should be aware that dropping coverage could make the company less attractive to potential employees. Moreover, this may lead to current employee dissatisfaction and could result in their departure to greener pastures. If enough employees decide they are dissatisfied, this could set the company back and result in the loss of revenue greater than the costs of continuing to offer spousal coverage.

As with the above example, the decision to offer, drop, or continue spousal coverage should be ultimately decided on a case-by-case basis.  If you are unsure of your stance on spousal coverage, come see us about your particular situation so we can help guide you. 

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

Fair Labor Standard Act: October 1st Deadline

Though the regulation under the employer mandate to offer qualified coverage to full-time employees or risk a possible penalty has been delayed to January 1, 2015, employers should not decode this as a sign to stray off the road to complying with the Affordable Care Act. Among other nitty-gritty matters you should be concerned with, there is an upcoming deadline that must be met to avoid violating the regulations of the Fair Labor Standard Act (FLSA) in accordance to the Affordable Care Act. By October 1, 2013, the FLSA requires all employers to provide a notice to employees with information about the available exchanges. Although the exchanges are not fully functional, the notice must be given to all employees by the deadline, despite their employment status. Meaning all employees must receive a notice whether they are part-time or full-time employees. Upon delivering the notice, there are certain requirements that the notice must include in order to meet the FLSA’s requirements. One of the requirements is that the notice must be written in language that is understandable by the average employee.

Additionally, the notice must be given free of charge and it must be issued automatically. For new hires, the notice is within the requirements of the FLSA if it is provided within 14 days of the employee’s start of employment. More specifically, the notice must:

      

• Inform the employee of the Marketplace, along with details of the assistance available to the employee through the Marketplace, and information on how to contact the Marketplace upon requested assistance.
• Inform the employee that if the employer’s share of the coverage plan is less than 60 percent, then the employee may be able to apply for a federal premium tax credit if a qualified health plan is purchased through the exchanges.
• Inform the employee that in the event they choose to purchase a qualified health plan through the Marketplace, then they may risk the loss of the employer contribution to any health benefits plan offered, and that all or a fragment of the employer contribution may be excludable from income for Federal income tax purposes.  

To make the distribution of the notice more convenient for employers, the Department of Labor (DOL) has released model notices for guidance. Provided by the DOL are two notices, one formatted specifically for employers who plan on offering coverage, and one for employers who do not plan to offer coverage. At this point you should have a clear idea of which form is appropriate for you. However, if you are an employer who remains uncertain on your coverage plan, I advise you to make an appointment with us in the near future to discuss your coverage plans. For those employers who have decided on a coverage path, you should be aware that the same form must be handed out to all employees, including new hires. In brief, please note this is only an overview of the FLSA notice requirements. There may be additional requirements not previously noted. For further guidance, please consult us about your specific concerns so we may properly help you meet this deadline. 

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

How To Communicate With Your Employees On The ACA

In an article written by the Houston Chronicle, Governor Rick Perry and other Texas officials have openly expressed their opposition to the ACA, stating they believe the health care law infringes on personal liberties, disrupts state sovereignty, and that they retain no interest in the promotion of the Affordable Care Act. Governor Perry’s stand on the ACA could explain why there might be a scarcity of information on the ACA in Texas, but alongside data from the Kaiser Health Tracking Poll in April; 42 percent of Americans are unaware the ACA is law. This statistic raises concern on the overall shortage of information provided on the ACA to the nation as a whole. Furthermore, it suggests that your employees are probably uninformed on what the Affordable Care Act is and how it could affect them. As their employer, you have the responsibility to communicate with your employees on health care reform and to keep them updated on any changes you plan on making to their coverage. This includes providing an understanding of how the ACA works, how it affects you and your employees, and how to best convey this information to them.

Regardless of your decision to offer insurance or not, the ultimate goal is to maintain a steady flow of communication between you and your employees throughout the health care reform transition. The sooner the communication between you and your employees begins the better. By Oct. 1, all companies are required to provide employees with information on available exchanges, possible subsidies, and a summary of benefits and coverage at open enrollment for 2014. Additionally, because there is much speculation of the possibility of employers dropping coverage in 2014, you should address this issue as well, and be clear about your specific plans for the new year.

Before you communicate possible changes to your health care, be sure to have a strategic plan on how to effectively relay these changes. Know exactly what you are changing and how it will affect your employees. In the case you have decided not to offer coverage to your full-time employees, it is advised to inform them as soon as possible. You don’t want the news to be a complete surprise. You should give them enough time in advance to figure out their options. Alternatively, if you are planning to offer your full-time employees coverage, you may want to take this opportunity to remind them of their value and that offering coverage is an investment you are happy to make. Despite your decision, you need to construct a method to reach out to your employees by utilizing a variety of tools to deliver the information. You can accomplish this by teaming with your HR department to compose newsletters, emails, or host informational sessions on related topics your employees may not know. In addition, you may want to make sure your employees are knowledgeable of ACA terminology. For instance, provide them with definitions on subsidies, exchanges, essential health benefits, etc.  The more you educate your employees on health care the easier their adjustment to any changes you make will be.

Lastly, you should be ready for your employees to have questions about the information you have provided to them. You should be prepared for these questions, but you may not necessarily have all the answers. This is where we come in. We know all about the ACA and we can advise you as you begin to develop communication with your employees. Give us a call. The sooner you start communicating with your employees the less time they will remain in the dark.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

Private vs. Public Exchanges

In the realm of health care reform, it’s important you are aware of the different types of available exchanges. For the most part there are private exchanges and public exchanges, both of which cater to different approaches to offering health care plans. However, according to TimeMagazine, within the private exchanges, a number of insurance brokers are offering health plans that sound too good to be true.  Specifically, the article warns consumers to be skeptical of “discount medical plans,” which are known for strategically labeling themselves as affordable health coverage. Most “discount medical plans” give the illusion of providing full coverage to customers, but in reality most of them fall short of the coverage promised. As a result, customers that buy into these “discount medical plans” will soon realize that most of their medical needs will not actually be covered. Therefore, employers should make  sure when purchasing health insurance from the exchanges that they are actually getting what they pay for, and thus employers are encouraged to seek legal advice before committing to any type of market.

Private exchanges, however, are generally expected to be a legitimate competitive force to the public exchanges provided by the Affordable Care Act. In comparison to public exchanges, private exchanges argue they provide employers with more transparency, more choices for employees, and more control over health costs than the public exchange. For example, private exchanges provide employers with a fixed contribution strategy to offer employees more choices, while still controlling costs. In other words, the employer provides the employee with a set amount to be spent on a health plan, which can be tailored to their personal needs. This approach is intended to give the employee free range to pick a health plan while the employer is able to stick to a fixed budget and keep track of how much the employee is spending.

Conversely, public exchanges are designed to make shopping for insurance less of a hassle for employers. All the SHOP Exchanges will be accessible on one specific website. However, since more than half of all the states, including Texas, opted to have the federal government run their exchanges, the Obama Administration announced the federal SHOP exchanges would be delayed until 2015. In 2015, employers will have four different levels of health plans to choose from: Bronze, Silver, Gold, or Platinum. Every insurance company listed on the federal SHOP Exchange must conform their policies to one of these four levels, in addition to meeting other requirements, before being listed on the exchange. Next, federal SHOP Exchanges will provide employers with two measures of offering insurance. The first requires the employer to choose a level, and then give their employees choices among that level. In the second option, the employer picks the plan, without giving the employee any choices, and the employee simply enrolls in the chosen plan. Transitional relief for states that choose to run their SHOP exchanges starting in 2014, provides the employer only with option two while option one can be put off until 2015. These two options were specifically designed for small businesses, giving them a simplified process of shopping for a suitable health insurance plan.

If you’re deciding whether to go with a private or public exchange, contrast what they individually have to offer and align your values with the options they each provide. Also, be apprehensive of “discount medical plans” that label themselves as an affordable alternative to standard health coverage, but in reality offer no coverage or very little. For more information on private and public exchanges, contact us so we can lead you in the right direction.  

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

The Young and the Employer Mandate

The Affordable Care Act’s individual mandate kicks off in January, but the question remains:  who will opt-in for coverage among your employees?   Experts predict that the cost of individual insurance premiums will largely depend on what younger employees (those below 30) do or don’t do.  Insurance premiums are priced based on the relevant risk pool’s propensity for risk to materialize.  In other words, the more likely an insured group is to become sick, the higher the premiums will be.  Younger people tend to get sick less than older people.  Insurance companies want young people in the risk pool to even out the risk that the older people otherwise cause the insurance company to undertake.  The perfect employee, from an insurance company’s perspective, is someone who pays premiums every month but never gets sick (and therefore never files any claims).  In such a situation, money is only coming in to the insurance company (via premiums), but no money is going out (via satisfied claims). If young people do not opt-in to insurance coverage, the only people left to insure are older people that are more likely to get sick.  This means higher premiums for employees and employers.

The response to the situation above depends on politics.  Enroll America is a non-profit organization that hopes the Affordable Care Act succeeds as envisioned.  Enroll America and other groups have hired canvassers to enlist at least 2.7 million young people to sign up for insurance coverage on an exchange.  Conversely, Freedom Works is an organization trying to recruit as many elderly, sick people as possible to drive up the costs of insurance coverage under the Affordable Care Act to unravel the entire Act.

Politics aside, this battle should crystallize something to employers that I have been saying for months: every response to the Affordable Care Act is different.  Your ACA response should be tailored to your specific workforce.  As the political battle above shows, if you have a workforce that has younger employees, your response should not mimic a workforce that has older employees.  

Let’s work through just one example to show you how employee age affects your responsibilities under the employer mandate. After browsing the Internet for a bit, going to a few seminars, and watching the news, you know enough to know that you have to offer coverage to your full-time employees.  You survey your payroll records and discover that of your 250 employees, 150 are full-time employees.  Let me be emphatic:  it is a mistake to assume that all 150 full-time employees will accept the coverage you offer them.  There are many reasons why any of those 150 full-time employees will not accept an offer of coverage.  One such category is employee age. 

One of the changes that the Affordable Care Act made to coverage was to make young adults eligible for coverage under their parents’ coverage until the age of 26.  So let’s say that the business I identified at the start of the last paragraph is a restaurant across the street from a major university.  Most of the employees are likely to be servers, hosts, bussers, etc., who also happen to be college students at the university across the street.  If they are still on their parents’ insurance coverage, they are likely to stay there even after 2014 and 2015.  So of those 150 full-time employees you thought you had to cover, you may actually have to cover far less.  It depends on your specific situation.  Give us a call so we can help you navigate the ACA waters based on your specific vessel.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/ 

The Affordable Care Act: What Business Owners Should Know

On July 2, 2013, the Obama administration made the decision to delay the employer mandate of the Affordable Care Act until January 2015. According to information released by the House Budget Committee, the delay is estimated to cost the nation a reported $12 billion more than previously determined. What does this mean for you as a business owner? While the nation is projected to accumulate high costs over the next couple of years, we want to make sure your business avoids doing the same. Before implementation, a few basic assessments are necessary.

Know your employees. Under the employer mandate, businesses with 50 or more full-time equivalent employees are required to offer a qualified health plan to their full-time employees. To find out if this applies to your business, you need to know how to correctly count your employees. Answer the following questions: Who are your full-time year-round employees? Who are your full-time partial-year employees? Who are your temporary employees? These answers should help you calculate a fairly accurate number of your full-time equivalent employees. This number will determine if you are subject to the employer mandate. Although be aware, if you own more than one business, there may be other factors you may have to take into account.

Know your options. Although the ACA requires a business with 50 or more full-time equivalent employees to offer qualified health plans (or likely be penalized), there are other routes you should consider. Take some time to weigh your options. List the pros and cons of offering qualified insurance. Assess your financials. Ask yourself, what’s important to you as an employer? The Affordable Care Act is not black or white. There are a variety of ways to intelligently respond to it.

Know the SHOP Exchanges. On October 1, 2013, the Small Business Health Options Program Exchange will only be available to businesses with 50 or less full-time employees, with the exception of some states allowing 100. All businesses with more than 50 and less than 100 full-time employees will have access to the SHOPs beginning in 2016. The provisions for SHOP Exchanges vary from state to state. For Texas, the federal government will run the exchanges. While 12 states have already released premium rates to the public, Texas is not yet one of them.

Should you have any questions about the Affordable Care Act, give us a call. We have answers for you. With our professional advice, we can customize a plan to best benefit you and your business moving forward.

Mario K. Castillo

Email: mcastillo@montyramirezlaw.com

Telephone: 281.493.5529

Website: http://www.montyramirezlaw.com/