For years now one of the biggest fears with the Affordable Care Act has been that people might see delays in service due to higher volumes of patients. Instead we are seeing a much more welcome delay: a delay in the implementation of penalties for businesses who don’t comply. The Obama administration has given a healthcare reprieve for small businesses who have 50 or more employees and would have been required to offer affordable insurance plans in 2014. That date has been moved back to 2015.
The date change has been blamed on slow implementation by the IRS, most businesses not being prepared for it, and the hope that more private insurance companies will come on board with the various exchanges. Others have mentioned the possibility that it could have something to do with the 2014 midterm elections.
In fact, the small business penalty is likely to affect far more businesses than originally advertised. Common ownership laws make business franchises a huge target of the penalty. In other words, someone might have five restaurants with ten employees in each one. If they don’t offer health insurance to those employees, they could be facing a penalty of between $100,000 and $150,000 or more per year.
The other issue, highlighted here, is that the healthcare law has a new definition of full-time. In the past someone had to work 40 hours a week to be considered full-time. The healthcare law changes that. For the purposes of the business penalty, full-time is someone who works 30 hours a week. It also includes FTEs or Full-Time Equivalents. If three people each work ten hours a week, that equals one full-time employee.
The penalty is $2,000 per employee for employers with 50 or more employees who don’t provide affordable health insurance plans. If those employees then receive tax credits for purchasing their own health insurance from the exchanges, the penalty goes up to $3,000. There are some planning steps available, and you may want to review your business situation with your tax accountant. We now have until 2015, but don’t expect the penalty implementation to be delayed again to the 2016 election year.