ACA Controlled Groups
Section 4980H of the Internal Revenue Code includes a provision for companies that have a common owner (or are otherwise related) are combined and treated as a single employer. This “controlled group” of companies must be combined for purposes of determining whether they collectively employ at least 50 FTEs. If the combined total meets the 50 FTE threshold, then each separate company shall be considered an Applicable Large Employer (ALE) subject to the ACA’s Employer Shared Responsibility provisions, even though those companies that individually do not employ enough employees to meet the ALE threshold on their own.
A controlled group exists if there is either a:
- Parent-subsidiary controlled group,
- Brother-sister controlled group, or
- Combination of the above.
Parent-subsidiary controlled group
One or more companies are connected through stock ownership with a common parent corporation, and: (a) 80% of the stock of each company (except the common parent) is owned by one or more corporations in the group and (b) the common parent company owns 80% of at least one other company.
Brother-sister controlled group
Two or more companies where five or fewer common owners (individuals, estates, trusts) own directly or indirectly (spouse, child, parent) a controlling interest of each group and have effective control.
- Controlling interest:
- at least 80% of each company (but only if such common owner owns stock in each company)
- Effective control:
- more than 50% of the stock of each company, taking into account the ownership only to the extent such ownership is identical with respect to each company.
Combined controlled group
Three or more corporations, if:
- Each organization is a member of either a parent-subsidiary or brother-sister group, and
- At least one organization is the common parent of a parent-subsidiary group and is also a member of a brother-sister group.
ACA Measurement Periods
The employer shared responsibility provisions, referred to as “pay-or-play” employer mandate, of the Affordable Care Act (ACA) will take effect for large employers on Jan. 1, 2015. Employers need to take action now, as the measurement period for full-time equivalent employees can be three to 12 months, with a stability period that generally cannot be shorter than six months.
If you would like to know more about starting ACA Measurement Periods, visit the Society for Human Resource Management’s webpage.
Small Business Tax Credits
If you are considered a small employer, you might be eligible for the Small Business Health Care Tax Credit.
To be eligible for the credit, you must:
- have purchased coverage through the Small Business Health Options Program – also known as the SHOP marketplace
- have fewer than 25 full-time equivalent employees
- pay an average wage of less than $50,000 a year
- pay at least half of employee health insurance premiums
For tax years beginning in 2014:
- The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
- To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace or qualify for an exception to this requirement.
- The credit is available to eligible employers for two consecutive taxable years.
You must use Form 8941, to calculate the credit. For detailed information on filing out the form, see the instructions for Form 8941.