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ADP: Some employers to automate offering affordable coverage

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Analysts at ADP are looking at a Patient Protection and Affordable Care Act (PPACA) implementation question that hasn’t gotten much attention: The details involved with how employers will try to meet the PPACA coverage affordability requirements.

PPACA is set to require “affected large employers” to offer affordable coverage with a minimum value or else face the possibility of having to pay large “shared responsibility” penalties.

See also: IRS drafts large-group minimum value rules

The Internal Revenue Service (IRS) has come up with several different safe harbor rules employers can use to show that their coverage is affordable without having to file extra paperwork.

  • An employer can show that a worker’s share of the premiums is less than or equal to 9.5 percent of what the employer put in Box 1 of IRS Form W-2.

  • An employer can show that a worker’s share of the premiums is less than or equal to 9.5 percent of the Federal Poverty Level (FPL).

  • An employer can show that a worker’s share of the premiums is less than or equal to 9.5 percent of the worker’s monthly rate of pay.

ADP defines a midsize employer as one with 50 to 999 employees, and a large employer as an employer with 1,000 or more employees.

When ADP polled 800 benefits and human resources specialists and midsized employers and large employers, they found that 44 percent of the survey participants at midsize employers and 38 percent of the participants at large employers admitted that they still aren’t sure which approach their companies will use.

About 31 percent of the participants at large employers and 23 percent of the participants at midsize employers said they’ll use the monthly-rate-of-pay approach.

Only 13 percent of the large employers and 9 percent of the midsize employers expect to use the FPL approach.

ADP also found that, at the employers using the W-2 safe harbor, about 20 percent of the midsize employers and about 30 percent of the large employers expect to use an automated system to set the employee’s share of the premiums at or below the 9.5 percent threshold every pay cycle.

Elsewhere in the survey, ADP noted that 7 percent of large employers and 6 percent of the midsize employers are going to resist extending health coverage to all employees eligible for PPACA coverage.

Especially during the early years, rules for phasing in PPACA requirements could let employers keep some workers out of their health plans without actually having to pay the PPACA penalties.

See also: Minimum value

In later years, if the current rules stay the same, the PPACA penalties would apply.

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