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Affordable Care Act Update: Important Provisions Affecting Employers

Paycom closely monitors legislation that could impact our clients and has already begun implementing the necessary changes to our Payroll and HR application as required by the Patient Protection and Affordable Care Act that was signed into law by President Obama March 23, 2010. With the U.S. Supreme Court’s June 28th, 2012 ruling to uphold the constitutionality of the law, Paycom is recommending that employers review the following provisions that specifically affect their obligations. Numerous other provisions (not summarized below) will directly affect healthcare providers and businesses servicing the medical industry.

The below summary and answers do not constitute legal or tax advice but are being provided as a courtesy to Paycom clients.  If you have any questions concerning Paycom’s services please contact one of our representatives at 800-580-4505.

What are the main provisions of the law that have already taken effect?

  • Over-the-counter drugs are no longer eligible for reimbursement through Flexible Spending Accounts (FSAs), unless prescribed by a doctor.
  • Insureds are to receive a uniform summary of benefits and coverage explanation prior to an employee’s enrollment or re-enrollment in coverage.
  • Dependent coverage has been extended for dependents up to age 26.
  • Insurance plans must provide 100% coverage, with no deductibles or co-pays, for certain specified preventative care.
  • Insurance plans cannot deny coverage based upon preexisting conditions for insureds that are under the age of 19.
  • New insurance plans must implement an appeals process with certain minimum requirements for adverse determinations concerning claims and coverage.

What are the main provisions of the law that will affect employers in 2013?

  • Employers will be required to withhold an additional 0.9% tax on individual earnings and wages over $200,000. Tax liability for the additional 0.9% will also apply to joint return filers with combined earnings over $250,000. With respect to the withholding obligation, employers will not be required to track or account for the marital status or combined marital income of their employees.
  • Employers will be required to begin reporting the value of an employee’s health benefits on fiscal year 2012 W-2 wage statements issued in January 2013, however small employers (who filed less than 250 W-2 forms for tax year 2011) were granted a 2012 tax year temporary exemption from this W-2 reporting requirement.  Paycom has simplified this process for clients with flexible options for entering and tracking this information. Although it was optional, Paycom began reporting it in W-2 box 12DD on its 2011 W-2s for those clients who elected to report it. Our system is setup to report it on 2012 W-2s as well.  For additional information on how Paycom reports the value of an employee’s health benefits on form W-2, please contact one of our representatives at 800-580-4505.
  • Employers will be required to notify employees of the existence of and the services offered by health insurance exchanges.
  • Individual annual contributions to FSAs for medical expenses will be limited to $2,500 (indexed each year thereafter).

Other provisions not specifically affecting employers but taking effect in 2013 include: a 3.8% additional tax on higher-income taxpayers on unearned income such as dividends and capital gains; States will be allowed to form health care choice compacts to take effect in 2016; and insurance plans must provide premium rebates if certain loss ratio criteria are not met.

What are the main provisions of the law that will affect employers in 2014?

  • Employers with 50 or more full time employees will be required to provide minimum essential insurance coverage to employees or pay a penalty.  If an employer will assert that it does not meet the 50 employee threshold, it may be necessary for the employer to maintain detailed records on a month-by-month basis throughout all of 2013.
  • Employers must certify that its group health plan provides minimum essential coverage.
  • Employers must have a 90 day limit on enrollment waiting periods.
  • Employers with 200 or more employees will be required to automatically enroll each employee in its group plan unless an employee opts out of coverage.
  • Employers with 50 or more full time employees and all self-insured employees will be required to maintain and compile detailed information concerning coverage and enrollees for reporting to the IRS in 2015.

Other provisions not specifically affecting employers but taking effect in 2014 include: the individual mandate; the commencement of the phase-in of the Medicare donut hole fix; a prohibition on preexisting condition denials; and a prohibition on annual coverage dollar limits.

Other changes will take effect in 2015 and beyond including an increase in the individual mandate penalty and a new excise tax on high cost insurance plans.

The implementation of the healthcare reform law will be a complex multi-year process.  The process will include a multitude of new regulations that will interpret the law and clarify the requirements on individuals, employers and healthcare providers.

Paycom will continue to monitor all legislation affecting our clients. With the flexibility of our proprietary online system, Paycom can quickly react to necessary changes from new legislation and implement development updates with no system downtime or additional expense. To learn more contact Paycom today at 800-580-4505.

About Paycom
For 25 years, Paycom Software, Inc. (NYSE:PAYC) has simplified businesses and the lives of their employees through easy-to-use HR and payroll technology to empower transparency through direct access to their data. And thanks to its industry-first solution, Beti®, employees now do their own payroll and are guided to find and fix costly errors before payroll submission. From onboarding and benefits enrollment to talent management and more, Paycom’s software streamlines processes, drives efficiencies and gives employees power over their own HR information, all in a single app. Recognized nationally for its technology and workplace culture, Paycom can now serve businesses of all sizes in the U.S. and internationally.