ACA Challenges–What’s ‘Affordable’ and What’s ‘Minimum’ Coverage?

Benefits
by Stephen Bruce, PhD, PHR
"Yesterday’s Advisor featured attorney Martin Simon’s suggestions for coping with 2013’s requirements under the Affordable Care Act; today, definitions of “affordable” and “minimum value,” plus an introduction to a practical wage/hour guide."

Under what circumstances will an employer owe an Employer Shared Responsibility payment?

In 2014, says Simon, senior legal editor at BLR®,  if an employer meets the 50 full-time employee threshold, the employer generally will be liable for an Employer Shared Responsibility payment only if either:

  • The company doesn’t provide coverage to substantially all (95% or more) of employees (or doesn’t provide coverage at all), and at least one of the full-time employees receives a premium tax credit to help pay for coverage on an Exchange (4980H(a) liability), or
  • The employer offers health coverage to at least 95% of its full-time employees, but at least one full-time employee receives a premium tax credit to help pay for coverage on an Exchange (4980H(b) liability). This may occur because the employer did not offer coverage to that employee or because the coverage the employer offered to that employee was either “unaffordable” to the employee (see below) or did not provide “minimum value” (see below).

In both cases, at least one employee must have gone to the exchange and received a premium tax credit.

How does an employer know whether the coverage it offers is “affordable”?

If an employee’s share of the premium for employer-provided coverage would cost the employee more than 9.5% of that employee’s annual household income, the coverage is not considered affordable for that employee.

If an employer offers multiple healthcare coverage options, the affordability test applies to the lowest-cost option available to the employee that also meets the minimum value requirement (see below.)

Because employers generally will not know their employees’ household incomes, employers can take advantage of one of the affordability safe harbors set forth in the proposed regulations:

  • W-2 test. An employer can avoid a payment if the cost of the coverage to the employee would not exceed 9.5% of the wages the employer pays the employee that year, as reported in Box 1 of Form W-2.
  • Actual rate of pay test.
  • Federal poverty limit test.

Finally, a simple but comprehensive guide to wage and hour. Correctly apply the FLSA, remain the go-to expert with BLR‘s comprehensive guide. Save hours of research time.  Go here for information or to order Wage & Hour Compliance: Practical Solutions for HR


How does an employer know whether the coverage it offers provides “minimum value”?

A minimum value calculator will be made available by the IRS and the Department of Health and Human Services (HHS). Employers can put certain information about the plan, such as deductibles and co-pays, into the calculator and see a determination as to whether the plan provides minimum value by covering at least 60% of the total allowed cost of benefits that are expected to be incurred under the plan.

Is more detailed information available?

Yes. The U.S. Treasury and the IRS have proposed regulations on the new Employer Shared Responsibility provisions. Comments on the proposed regulations may be submitted by mail, electronically, or hand-delivered, and are due by March 18, 2013.

The complete Q&A may be found here:
IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

Compliance, from the new ACA to the long-time nemesis FLSA, is a never-ending challenge. At least we’ve got solutions for the FLSA part!

Yes, trying to comply with the wage/hour regs trips up even the most savvy practitioners, and the law’s complex requirements can easily land you and your company on the wrong side of a lawsuit or DOL investigation.

Fortunately, there’s help—Wage & Hour Compliance: Practical Solutions for HR provides you with detailed guidance on how to comply with the FLSA and takes you through the most complicated wage & hour issues that HR practitioners encounter.

When you’re faced with a supervisor’s travel time question, an employee’s request for comp time, another executive’s suggestion that more assistant managers be deemed exempt from overtime, you’ll find answers in seconds, from a reputable and reliable source.


Wage and hour lawsuits are expensive—and easily prevented. Here’s how to protect against crippling judgments. Go here for information or to order Wage & Hour Compliance: Practical Solutions for HR


Wage & Hour Compliance: Practical Solutions for HR features:

  • Real-world examples of wage & hour challenges, and how to solve them
  • Multiple quizzes, so you can see where you need to review more carefully
  • An overtime exemption audit checklist, so you never make the wrong call
  • State-specific charts, for comparing your multi-state obligations
  • Sample policies, easily modified to fit your specific preferences
  • A quarterly newsletter, Wage & Hour Compliance Bulletin, to keep you aware of the latest developments in the law, and why they matter to you.

BONUS! Not just a manual. You also get:

  • Free CD-ROM containing over 20 forms, policies, checklists, state-by-state comparison charts and more, all so you can point, click and go.

Why are aggressive attorneys so eager to file claims on behalf of employees? Because there’s so much money to be made:

  • $4.75 million: Hospital in Thousand Oaks, California settles wage and hour lawsuit over miscalculated overtime pay and failing to compensate workers for missed meal and rest periods.
  • $1.15 million: Las Vegas construction company to pay in back wages to 1,060 current and former employees.
  • $976,327: New Mexico aerospace company settles with 900 employees who were routinely required to work through lunch breaks without compensation.
  • $340,400: New Jersey convenience store to pay back wages and damages for violations of overtime and recordkeeping.
  • $84,541: New York physical therapist agrees to pay 22 employees for minimum wage violations
  • $30,000: Texas chain of four gas stations to pay their six hourly employees, again for recordkeeping and overtime violations.

Avoid steep fines. Go here for information or to order Wage & Hour Compliance: Practical Solutions for HR.

Buyers’ Benefit: To make sure your Wage & Hour Compliance: Practical Solutions for HR remains current with changing interpretations and court decisions, we monitor courts, Congress, and state legislatures. Each year, we’ll rush you an updated edition and bill on a 30-day review basis. You pay only if you decide to keep the updated edition.

Stay up to date with wage/hour changes. Go here for information or to order Wage & Hour Compliance: Practical Solutions for HR.

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    April 9, 2013 11:58 pm

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  2. Barb        
    March 5, 2013 2:04 pm

    When is the minimum value calculator expected to be available?