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The ACA's Impact on the Hospitality Industry: What Employers Should Know Now

Blog Contribution by: Todd Reider, Benefit Advisor

Since its inception, the Affordable Care Act (ACA) has created a great deal of confusion for employers.  While most are feeling the burdens of the ACA, the hospitality industry has been particularly impacted by some of the law's provisions.  With an industry characterized by high workforce turnover and a large percentage of hourly workers, hospitality employers will need to pay particular attention to the ACA's employer mandate provision and the upcoming 2016 reporting requirements as outlined below.  

2015 Employer Mandate's Impact on the Hospitality Industry

The employer mandate, which took effect earlier this year, requires employers with 100 or more full-time equivalent employees (FTEs) to offer sufficient and affordable coverage to at least 70% of their full-time employees (this increases to 95% in 2016) or be subject to penalties.  The mandate will be expanded in 2016 to include employers with 50 to 99 full-time-equivalent employees. 

Employers who fail to offer coverage to at least 70% of full-time employees may be fined $2,000 per year per full-time employee, minus 30 (minus 80 in 2015) if one or more full-time employees obtains subsidized coverage on an Exchange.  In addition, employers who do not offer sufficient and affordable coverage will also be subject to penalties of $3,000 per year for each full-time employee who is not offered qualifying coverage and obtains subsidized coverage on an Exchange.

According to a recent benchmark analysis by Marsh & McLennan Agency, hospitality employers are experiencing nearly a 30% cost increase as they look to adopt compliant ACA strategies.  Most of this increase is attributed to offering benefits to those previously ineligible and by adjusting plan design to meet minimum standards.

Start Tracking Now: 2016 Reporting Requirements        

Beginning first quarter of 2016, employers with 50 or more FTEs will need to report to the IRS and full-time employees regarding the health coverage offered, if any, by the employer during the 2015 calendar year. 

These new reporting requirements are part of Sections 6056 and 6055 of the federal tax code. Here are the details of each:

  • Section 6056requires businesses that employ 50 or more FTEs to certify whether they offered minimum essential coverage to full-time employees.
  • Section 6055applies to providers of health insurance, such as insurance companies and employers with self-insured plans.  Reporting under this section is used to enforce the individual mandate.

The penalties for failure to comply with the reporting requirements can be $100 per return - this is up to $1.5M per year or $250 per return with no upper limit for failures due to intentional disregard. These penalties are steep so the time to start tracking is now to avoid risky financial exposure. 

If you have questions about the how the ACA will impact your business, please reach out to your local MMA representative.

Posted June 10, 2015

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