Medium-Sized Businesses Face Big Obamacare Bill

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Medium-Sized Businesses Face Big Obamacare Bill
Challenge: Robert Sheen at First Capitol Consulting’s office in Koreatown.

When the Obama administration delayed part of Obamacare for medium-size employers, the headline was a relief to many business owners: Companies with between 50 and 99 employees would have until 2016 to start providing coverage to their workers.

But many businesses might have missed the fine print: Come this time next year, those employers still have to report to the Internal Revenue Service whether or not they offered insurance to their workers in 2015, just like larger companies. And that information must be given to employees along with their W2s in January.

Sound simple? It’s not. The process involves matching up human resources and benefits data on a monthly basis – for every employee.

Companies that fail to file the information with the IRS will have to fork over $100 a worker. That’s why business owners, even ones still sweating this year’s tax return, should already be thinking about next year and starting to track insurance information, said Robert Sheen, founder and president of Koreatown’s First Capitol Consulting Inc.

“The big challenge we see right now is a company needs to marry these data that meet this Internal Revenue Code requirement,” said Sheen, whose firm has partnered with accounting firms, including Leavitt and McGladrey, and insurance brokerages to help corporate clients comply with the Affordable Care Act. “They can’t keep it all separate and at the end of January try to put certain data from different departments into one source.”

And if L.A. businesses are using a pending Supreme Court decision for Obamacare case King v. Burwell as an excuse to delay, they shouldn’t. That case deals with subsidies for people getting health insurance through a federal insurance exchange and likely won’t have an immediate effect in California.

Kevin Kuhlman, director of federal public policy for the National Federation of Independent Business, puts it in more practical terms.

It’s better to work with your accountant and health insurance advisers than leave your fate to the nine Supreme Court justices, he said.

Reporting mandate

Starting next year, employers with 50 or more full-time equivalent employees must file with the IRS an annual return that reports whether they offered health insurance to their workers and, if so, what kind of coverage.

Kuhlman explained the actual reporting contains two portions: one form, similar to a W2, that an employer must give to employees by the end of January, and another set of forms employers must file directly with the IRS by the end of March of next year.

All this reporting will verify that if employers offered health insurance to their workers, the coverage was both adequate – it met certain minimum coverage requirements – and affordable – it cost employees no more than a certain percentage of their individual income.

Sheen said the IRS does this to ensure employees are getting the correct tax credit if they’re purchasing insurance through an exchange.

If employers fail to file this information on time or do so incorrectly, they can face penalties of $100 for each employee, up to $1.5 million. Those fines can be lowered if businesses correct their omissions in a timely fashion, but penalties can also jump to $250, with no upper limit, if the IRS finds a business intentionally disregarded the law.

Despite the potential for fines, Dede Kennedy-Simington, president of the Los Angeles Association of Health Underwriters, said she’s seen a wide range of preparedness among L.A. employers.

“Some are on it,” she said. “Some are in left field.”

To meet IRS requirements, employees need to pull all manner of human resources information, including employees’ hiring and termination dates, birth dates, union status and hours worked, Sheen said.

On the benefits side, employers will need to show not only whether they offered insurance to employees, but figure out how much employees paid for coverage and calculate the percentage of income each employee had to fork over.

“There’s a lot of different factors to streamline,” said Kuhlman. “You might be talking to an accountant on income and to a health insurance broker on health insurance information. … That’s why I think it is important for employers to get a system in place now before scrambling on this next spring.”

He sees this as a big business-development opportunity for payroll companies, accounting firms and other human resources outsourcing outfits.

Indeed, Sheen has been working overtime handling Obamacare compliance.

“Some of my guys working to get the data in the right format have been staying until 1 o’clock, 2 o’clock in the morning or overnight,” he said.

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