TurboTax / Tax Calculators & Tips / All Tax Guides / Health Care / Affordable Care Act (Obamacare) Survival Guide For ALEs

Affordable Care Act (Obamacare) Survival Guide For ALEs

Updated for Tax Year 2016


OVERVIEW

A key feature of the Affordable Care Act (also known as Obamacare) is the way in which responsibility for affordable health care coverage is shared between stakeholders. Companies that employ 50 or more people may be considered "applicable large employers" or ALEs under the Affordable Care Act. ALEs have specific provisions when it comes to providing health insurance, and these provisions are being phased in from larger to smaller companies over time. The Internal Revenue Service (IRS) notes that less than 5% of employers are considered ALEs.


Determining ALE Status

Your status as an ALE is determined each calendar year, based on the number of employees working for you. Under the Affordable Care Act, a full-time employee works 30 hours or more per week, and 50 full-time workers qualifies as an ALE.

Part-time workers' hours are combined to determine how many full-time employees they equal. For example:
• Two part-time employees each working 15 hours/week would count as one full-time employee
• Seasonal employees may also be included if your company has 50 or more employees longer than 120 days in a calendar year and the additional employees are hired seasonally

"Your ALE status for a tax year depends on the number of employees you had in the previous year," says accountant Martin Schwab of Rochester, Michigan. "If you had 60 full-time or full-time equivalent employees in 2016, you are an ALE for the 2017 tax year."

Employer Shared Responsibility

Once your business qualifies as an ALE, you're required to offer health insurance to your employees and their dependents that meets a minimum standard, defined by the Obamacare legislation. A company that doesn't offer health insurance to 95% or more of its employees may be required to pay a penalty.

A company may also be liable for the penalty, called the employer shared responsibility payment, if insurance coverage isn't affordable as defined under Obamacare. This may be revealed if at least one employee applies for and receives a Premium Tax Credit to help pay for coverage through an online health care Marketplace. However, the employer shared responsibility payment provision is being introduced in steps, so penalty exemptions may be available.

Defining Affordable Coverage

Obamacare defines an upper limit of affordability as 9.5% of an employee's annual household income. Since you're not in a position to know an employee's household income, the IRS provides some rules of thumb called "safe harbors," based on information you do have on those working for you. If the health insurance offered by your business complies with one or more of these safe harbors, you're meeting your employer shared responsibility. There are three affordability safe harbors:

• The Form W-2 safe harbor, based on employee wages reported in Box 1
• Rate-of-pay safe harbor, based on employee wages at the beginning of a health insurance coverage period
• The federal poverty line safe harbor, where the employee's health insurance contribution doesn't exceed 9.5% of the federal poverty line for a given year

Use of any or all of these safe harbors is optional, but they must be applied consistently across your workforce. If your business offers more than one health insurance option, the affordability measure applies only to the lowest cost option.

Health Coverage Minimum Value

The health care coverage you provide to your employees has to meet Affordable Care Act standards for you to meet your responsibility as an employer. The rough guideline is that a plan covers at least 60% of the total cost of benefits for health care services covered under the plan.

To aid you in determining how your health insurance option compares, the IRS and Department of Health and Human Services provide a minimum insurance value calculator. The calculator is set up as a spreadsheet, where you enter details of your plan, largely using check boxes, showing how your plan stacks up to Obamacare requirements.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/1040A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Bonus Offer with TurboTax Self-Employed: File your 2016 federal return with TurboTax Self-Employed by 4/18/17 and receive a complimentary subscription to QuickBooks Self-Employed until 4/30/18 at no additional cost. After you file your taxes, you must activate your QuickBooks Self-Employed subscription by 7/15/2017 by logging into QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/login. Once activated, you will have access to QuickBooks Self-Employed until 4/30/2018.
    Offer valid only for new QuickBooks Self-Employed customers.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not file with TurboTax Self-Employed by 4/30/2018, your QuickBooks Self-Employed subscription will automatically renew on 5/1/2018 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself: In order to pay for the price of TurboTax Self-Employed, you will need at least $600 in deductible business expenses. This calculation is based on the self-employment tax income rate for tax year 2016.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or SmartLook); not included with Federal Free Edition. Feature availability varies by device. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • TurboTax Self-Employed Expense Finder: Available only in TurboTax Self-Employed. Not available for people with certain types of expenses and tax situations including paying contractors or employees, home office or vehicle actuals, inventory, self employed health insurance or retirement, asset depreciation, sale of property or vehicles, and farm income. Some financial institutions limit the timeframe for which historical transactions may be imported by ExpenseFinder. ExpenseFinder expected late January (late February for mobile app).
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.