MarchReport-toFlip - page 10

Ed. Note:
This information does not reflect any guidance issued on or after Feb. 1, 2016.
2016 ACA Changes: Should Employers
Re-Think Their Leave of Absence Policies?
W
hen it comes to leaves of absence, employers have
different methods of dealing with health coverage.
Some employers will terminate health coverage at the
beginning of the leave or after a defined period after the leave
begins. Other employers will continue health coverage as long
as the employee continues to pay for it. Still, other employers
will continue health coverage throughout the leave even if the
employee fails to pay for it.
Employers who have not already done so should consider
how their leave practices may create increased liability for an ex-
cise tax (the “employer mandate penalty”) under the Affordable
Care Act (ACA). The ACA’s penalty provisions have changed, so
practices that may have been acceptable in 2015 may expose the
employer to significant risk in 2016.
Employer Mandate Penalty:The Basics
An applicable large employer (generally, an employer who
employed an average of at least 50 full-time and full-time equiv-
alent employees in the prior calendar year) can be subject to the
employer mandate penalty if the employer does not offer a suf-
ficient level of affordable health coverage to each of its full-time
employees. The calculation of the penalty will depend upon how
many full-time employees have been offered health coverage. If
the employer has offered health coverage to fewer than 95% of
its full-time employees and their children, and if just one of the
employer’s full-time employees obtains a federally-subsidized
insurance policy from an ACA Marketplace, the employer’s
penalty will be equal to $180 multiplied by the total number of
the employer’s full-time employees (minus the first 30) for each
applicable month (the “A penalty”). If the employer has offered
health coverage to at least 95% of its full-time employees and
their children, the employer’s penalty will be equal to $270 mul-
tiplied by the number of the employer’s full-time employees who
have obtained a federally-subsidized insurance policy from an
ACA Marketplace for each applicable month (the “B penalty”).
For example, Company A employs 100 full-time employees
and offers health coverage to 95 of them. One of the full-time
employees who was not offered coverage obtains a subsidized
marketplace policy for November and December. Company A’s
penalty would be equal to $270 x one employee x two months =
$540.
By contrast, if Company A in the example above offered
health coverage to only 94 of its full-time employees in Novem-
ber and December, Company A’s penalty would be equal to $180
x (100-30) employees x two months = $25,200.
Full-Time Employee Status of
Employees on Leave
The employer mandate penalty applies for failure to offer
health coverage to full-time employees. Therefore, the ACA’s im-
pact on an employer’s leave practices will depend upon whether
coverage is terminated during the leave (other than for non-pay-
ment) and, if so, whether the employee is a full-time employee
during the leave.
If an employer continues health coverage for the full length
of a leave or terminates health coverage during the leave only
for non-payment, the ACA will not have any impact on that
employer’s leave practices. The ACA will come into play only for
an employer that terminates coverage during a leave for reasons
By Kimberly Wilcoxon
10
l
March 2016 CBA REPORT
Feature Article
1,2,3,4,5,6,7,8,9 11,12,13,14,15,16,17,18,19,20,...36
Powered by FlippingBook