For decentralized subsidiary companies with fewer than 100 employees, the Affordable Care Act (ACA) mandates may prompt significant changes. Many subsidiaries, especially those within a holding company, must take a closer look at the employer mandate to avoid penalties and ensure compliance.
ACA Requirements and Compliance Deadlines for Subsidiaries and Holding Companies
Starting in 2015, the ACA requires companies with 100 or more full-time employees to offer health care benefits, and beginning in 2016, this mandate extends to companies with 50 or more full-time employees. The challenge for decentralized holding companies lies in determining whether these combined entities meet the 50-employee threshold. Each subsidiary within a controlled group is required to comply based on the total headcount across all entities.
Decentralized Benefit Plans: Risks and Potential Penalties
Subsidiaries often assume that compliance requirements apply based on their individual full-time employee count. However, miscalculations can lead to penalties of up to $3,000 per employee annually for non-compliance. To meet ACA standards, companies must:
- Offer medical coverage to employees working 30+ hours per week.
- Calculate hours for variable hour employees.
- Provide a ‘minimum value’ plan.
- Pass an affordability test.
- Report plan details to the government.
Key Compliance Questions for Holding Companies
Holding companies managing decentralized subsidiaries should consider the following:
- Do the subsidiaries have more than 50 full-time employees combined?
- Does each group health plan meet ACA requirements?
- What is the cost of compliance compared to potential penalties?
- Is each subsidiary prepared for the ACA’s reporting requirements?
- Has each subsidiary planned for the ACA’s 2018 40% excise tax (“Cadillac tax”)?
Ensuring Compliance Across All Subsidiaries
To stay compliant, holding companies can use online tools to assess ACA readiness and engage a qualified professional to review and implement compliant policies across all subsidiaries. A thorough review will address ACA requirements, perform a cost-benefit analysis, and establish a streamlined approach to meet federal regulations.
Contact Information
If you have questions or would like expert assistance with ACA compliance, please contact me at 410-773-4121 or mcoan@psafinancial.com. Act quickly, as the 2015 ACA compliance deadline is approaching, especially for companies with variable hour employees whose measurement period may already be underway.
