Yesterday, in a 6-3 decision, the U.S. Supreme Court upheld the federal subsidies of the Affordable Care Act (ACA) by ruling that the tax credits for health insurance are authorized in the 34 states that have a federal marketplace.
As a result, subsidies will remain available for qualifying individuals, regardless of whether they obtain coverage on a state or federal exchange.
What This Means for Employers
Because the Supreme Court ruled in favor of the federal government’s position, individuals will remain eligible for subsidies. However, employees eligible for employer-sponsored health plans may not be eligible for subsidies through the marketplace, so long as the employer-sponsored plan meets affordability standards under the ACA.
Employees are eligible to pursue health insurance through the marketplace and may qualify for subsidies if the employer does not provide coverage that the ACA considers “affordable” (if the employee’s share for the lowest-priced plan does not exceed 9.5 percent of his or her annual household income) or meets the ACA’s standard of providing “minimum value” (by paying at least 60 percent of the cost for medical services).
Employers should continue to take control of their ACA compliance. All requirements remain as usual. Employers held to the ACA mandate still must handle reporting data to include the measurement, stability and administrative period. For Applicable Large Employers (ALEs), filing with the IRS remains mandatory and statements must be provided to full-time employees regarding health coverage.
Cadillac Tax: Still an ACA Hot Topic
In addition, employers with high-cost health plans may wish to consider paring back benefits in order to dodge the 40-percent excise tax that goes into effect in 2018. This so-called “Cadillac tax” applies to plans in which benefits exceed $10,200 for individuals and $27,500 for families.
Experts estimate that 60 percent of employer plans will exceed the individual and family limit by 2018.
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The content of this blog is intended to keep interested parties informed of legal and industry developments for educational purposes only. It is not intended as legal opinion or tax advice and should not be regarded as a substitute for legal or tax advice.