The new tax law made big changes to the ACA, but employers can’t fall into the trap of thinking it’s gone or just ignoring it. Here’s what you still need to do to remain in compliance.
What Made It Into the Tax Cuts and Jobs Act
Changes to the Affordable Care Act were a hotly contested part of the debate over the Tax Cuts and Job Act. In the end, only the individual mandate will change.
Beginning in 2019, the individual mandate is fully repealed. However, unlike other provisions of the new tax law, it does not take effect for the 2018 calendar year. The reason is that 2018 health insurance rates were already set and health insurance enrollment mostly completed by the time the law passed.
The repeal of the individual mandate means that individuals who cannot afford to buy or choose not to buy health insurance will no longer pay a tax penalty when they file their tax returns.
The Employer Mandate Is Still in Place
There were no changes made to employer responsibilities. Designated employers must provide health insurance for their employees or else pay a tax penalty.
The test for whether an employer must provide health insurance centers on the number of employees, specifically 50 or more full-time or full-time equivalent employees. A full-time employee is one who works 30 or more hours in a week.
A full-time equivalent employee is the same as two or more employees whose hours add up to one full-time employee. For example, two half-time employees would equal one full-time employee; having 100 half-time employees would mean the employer has 50 full-time equivalent employees and must offer health insurance.
Early in his administration, President Trump showed interest in using executive orders to reduce enforcement of Affordable Care Act requirements. To date, the administration has taken no action on the employer mandate, and the IRS has continued to enforce the law as written.
Even though the individual mandate was repealed, the employer mandate is still in place without change. Employers should review their obligations with their tax professionals to avoid penalties.