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Supporting you through the 2020 ACA reporting season

We know that workplace challenges often create the greatest stress on HR teams working diligently to keep their workforce healthy and safe. That's why we are committed to sharing what we know around regulatory changes and their bearing on health reform, insurance eligibility, payroll and more.

To keep you in the know, here's our Ask the Expert question: 

Q. Are workforce changes increasing my ACA Penalty B risk?

A. If you have reduced the number of hours an employee works and therefore, his/her pay, there are potential impacts to benefits and you could increase your Penalty B risk under the ACA law:

If your employees have been working less hours this year, are making less income, or have a lower rate of pay, your Penalty B risk could increase. Penalty B is calculated for every full-time employee who was not offered affordable minimum value coverage by their employer, and went to the Health Insurance Marketplace and qualified for a premium tax credit. The $3,860 penalty per year is multiplied by the total number of full-time employees who receive a premium tax credit or subsidy on the exchange.

The IRS offers three safe harbors:

  • Federal poverty level
  • Rate of pay
  • Form W-2, Box 1

As an employer, you may use one or more of these safe harbors to ensure the employee-required contribution is no more than the affordability threshold of 9.86 percent for 2020. If your employee’s wages have decreased due to working less hours or because you are providing a lower rate of pay, your benefits may no longer be considered affordable under the ACA. This situation is most common with employers who use the W-2 safe harbor, but could occur under any safe harbor.

Contact your account manager for information on your Penalty B risk (or HR Insights users can access their Penalty B dashboard for more information).

Also, see our How to Avoid ACA Penalties because of the New COBRA Guidance Ask the Expert.


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