“Complete details on some of these requirements are not yet known because they require administrative regulations that have not yet been issued. We can expect to see these regulations start rolling out over the next year,” said David Cole, a partner in labor and employment law at the Cobb-based firm Freeman Mathis & Gary.
For business owners, of top concern is the law’s requirement that beginning in January 2014, employers with more than 50 full-time employees must provide minimum essential coverage at an affordable cost or pay penalties. The statute’s definition of full-time is 30 hours per week. If employers choose not to provide coverage, the non deductible penalty equates to $2,000 per employee per year.
David Bottoms, senior vice president of benefits at The Bottoms Group in Marietta, said that while employers may consider dropping coverage and paying the fine, they “will have nothing to show for it.”
“The $2,000 penalty is not tax-deductible as a business expense, and there is high likelihood that the penalty will increase as the cost of the legislation continues to escalate,” he said.
Bottoms says additionally, by dropping coverage, the employer will no longer benefit from the reduced Social Security payroll tax cost resulting from employee premium contributions via the employer’s Section 125 cafeteria plan.
Cafeteria plans are named for the section of the Internal Revenue Code that allows employers to withhold insurance premiums from employees’ pay on a pre-tax basis.
Bottoms says he believes the vast majority of employers will want to keep coverage, but will want to make adjustments to their plan in order to ensure that they meet the requirements of the law.
He says the primary reasons why employers have offered coverage in the past — to retain and attract key employees, to provide tax-favored access to needed coverage and to facilitate employee health and wellness — have not changed with the law.
As for employees, Bottoms says there are benefits for them to purchase their coverage from their employers as well, including paying for the premiums out of their pre-tax income.
The law says that beginning in 2014, small businesses with fewer than 100 employees can shop for plans in state or federally run “insurance exchanges.” The law gives states the option to run the exchanges or default to the federal government. Gov. Nathan Deal stated after the election that because of restrictions that prevent the state from designing its own program, Georgia, along with many other Southern states, will likely decline participation.
Bottoms and Cole both caution all employers, regardless of the number of employees, about the new administrative requirements, including providing “summary of benefits and coverage” notices with open enrollment and new hire materials.
A second change is with W-2 reporting.
“Under Obamacare, all employers must report the aggregate cost of their employer-sponsored health insurance on employee W-2’s,” Cole said.
Cole says for the 2012 tax year, for which W-2s will be issued in January 2013, the requirement only applies to employers filing more than 250 W-2s.
Cole says this requirement will be extended to smaller employers in subsequent years and will eventually apply to all employers. The amount that must be reported includes both the employee and employer portions of the cost of the insurance.
Bottoms also warns employers to ensure all independent contractors are truly eligible to be classified as such.
“Enforcement of the Fair Labor Standards Act wage and hour requirements are being strictly enforced as employers have more incentive to classify employees as non-W2 to avoid the health care mandates,” Bottoms said.