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Affordable Care Act - Controlled Groups

Affordable Care Act (ACA)|Tax

By Dennis Mowrey

Beware of the Danger Zone

By now, most everyone is aware that the Affordable Care Act (ACA) is starting to kick into high gear and that Applicable Large Employer Groups (ALEs) will have their first annual tax reports due at the end of January 2016. This large-employer mandate will require applicable large employers, with 50 or more full-time equivalent employees, to offer affordable, minimum-value coverage to full-time employees and their dependents (to age 26).

As you start to breathe a sigh of relief that you have fewer than the 50 or more full-time equivalent employees, be aware that beneath the surface lies some hidden aspects of the Affordable Care Act. If an employer has multiple companies, each company may or may not be considered separate employers under the ACA. An employer could own several small companies (example – each with 20 employees) with each having fewer than 50 full-time equivalent employees, but under the controlled group rules, the common ownership could add up to more than 50 full-time employees and an employer could become an Applicable Large Employer.

The controlled group rules apply to Brother-Sister companies, Parent-Subsidiary companies, Affiliated Service companies, or any combination of the above.  If a common ownership exists, then the total number of employees for the group must be added together to determine ALE status for the ACA.

Employers that fail to follow the Affordable Care Act and do not offer insurance coverage to 95% of their full-time employees (70% for 2015) would be subject to a penalty. Penalties can also be imposed for those employers that do offer coverage but the coverage does not provide “minimum value” or is not “affordable.”

Larger companies will use their payroll service provider to prepare the appropriate reports, but make sure that the other companies that are under common ownership and may not use a payroll provider are not forgotten about.  Please contact your Schneider Down tax representative to ensure that you are compliant with the Affordable Care Act and visit our other articles on the Affordable Care Act.   

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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