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The IRS Announces An Additional 12 Month Delay In The Health Coverage Penalty for Midsize Employers

Posted on 10, Mar, 2014

Anyone running or managing their own business will be very familiar with the requirements of The Affordable Care Act when it comes to providing employees with healthcare coverage. Under ObamaCare employers were given until 2014 to provide healthcare cover for all full-time employees, but now with the realization that the current targets are simply untenable, the Obama Administration has decided to extend the deadline for midsize companies to implement its policies in 2016, and with larger companies being given an ObamaCare reprieve until 2015.

So if you have a business with between 50 and 99 employees your requirement to pay penalties has been delayed until 2016, but not eliminated entirely. This will still have all midsize company owners breathing a collective sigh of relief, because they're already struggling to find an economical way to pay for healthcare solutions for their workforce - or at least solutions which won't involve them closing their doors and going out of business.

There is another massive benefit for employees here because this delay might also prevent certain employers from simply reducing the working hours for most of their staff to less than 30-hours per week, instantly making them part-time employees in the process and also making them exempt from the ObamaCare Employer Mandate requirement. However Congress is moving to change the definition of exactly who can be classed as a part-time employee, and this is being done in an attempt to prevent employers from using this particular loophole with their staff in the first place.

Even with this temporary delay in place it's important that employers stay focused on the coming years because midsize companies will still need to have at least 70% of their employees covered by health insurance by 2016, and then 95% of employees covered within 12-months of that. Those requirements are obviously based on the shifting sands of ObamaCare, where sudden changes are more common than anything else - including the actual implementation of The Affordable Care Act in any meaningful way.

Obviously if your business doesn't meet its shared-responsibility target then you will be expected to pay the required penalty because of that.

There are two different penalties which you might become subject to, with the first of these being a financial penalty which is equivalent to the exact number of full-time employees you failed to provide healthcare insurance for, which is then multiplied by a dollar amount. It's worth noting that this penalty is payable even if just one single employee is forced to get their healthcare cover through an exchange instead of being provided by you, their employer.

A second penalty might also be payable even if you offer all your full-time employees health cover, but your solution proves to be too expensive or doesn't meet the minimum requirements. In this situation your employees would be forced to get healthcare insurance through an Exchange, resulting in you having to pay the penalty as a result of that decision on their part.

It's also important that you focus on providing at least "minimum essential coverage" for each of your employees to avoid any additional penalties - although there are exemptions from the "minimum essential coverage" rule such as being a member of a Native American tribe, as an act of religious conscience, or you have income which is below the amount requiring you to file a tax return.

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