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Preparing Your Business for the Imminent ESR Provision

Health Care

Despite the one-year delay in the enforcement of penalties under the Employer Shared Responsibility (ESR) provisions, you can’t afford to put health care reform (HCR) on the back burner. To comply with the ESR provisions set to take place on January 1, 2015, business owners need to proactively prepare in 2013 and 2014.

What should your business be doing now to prepare?

Familiarize Yourself with the 2015 Employer Expectations

While you don’t need to know everything about health care reform, the new employer requirements should be on your radar. From employer penalties to strict IRS reporting, you should fully understand what will be expected of employers in 2015, and get a head-start on meeting those requirements now.

Determine Current Employee Status

Under ESR, applicable large employers – those with 50 or more full-time employees (including full-time equivalent [FTE] employees) – will be required to provide affordable health insurance or face potential penalties from the IRS. To determine which employees must be offered coverage in 2015 to avoid potential assessments, employers need to establish look-back measurement and administrative periods as early as October 2013 for those using a 12-month period. Stability periods need to be established by January 1, 2015.

Track Employee Hours

Tracking employee hours is a key component of Employer Shared Responsibility, as it comes into play when determining an employer’s status as an applicable large employer (ALE), their employees’ eligibility for health coverage, and for fulfilling IRS reporting requirements. To determine ALE status, the IRS requires the calculations to include all hours of service, including paid and unpaid hours such as vacation time, sick time, disability, jury duty, military leave, and leaves of absence. Having a means to track employees’ hours starting this fall will also be beneficial for those ALEs using a one-year look-back period to determine employee full-time status. Carefully manage your workforce and this reporting will prove to be beneficial in the event of an IRS audit.

Confirm Your Health Coverage Meets the Minimum Requirements

Applicable large employers may face financial penalties if they fail to offer full-time employees health insurance coverage that meets the minimum essential coverage (MEC) requirements and one full-time employee receives a premium tax credit. Penalties may apply if coverage is deemed unaffordable or too low of value to the full-time employee. Assess your coverage and explore all of your options including the SHOP Exchanges, a health insurance marketplace for small businesses that will be introduced in 2014.

The bottom line is that as a business owner, you need to be staying on top of the ESR provision to ensure you can avoid penalties and meet compliance standards. For resources and assistance, visit https://www.paychex.com/health-reform/.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
Paychex is committed to providing resources to the Spanish-speaking community. To ensure we are providing the most up-to-date and accurate information, some content on this website will be shown in English, and will be provided in Spanish when available.