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Posted by: Altura Benefits in Insurance
For any small business, the decision to take on employees is a big move. Employers must navigate employment laws, including wage and hour requirements and anti-discrimination legislation. Employers must also consider their employee benefits package. Here’s a look at what small businesses are required to offer.
Under the Affordable Care Act (ACA), certain employers are required to offer health insurance coverage that is both affordable and provides minimum value to full-time employees and their dependents. Employers that do not meet this requirement may owe an employer shared responsibility payment. Additionally, certain insurance information must be reported to the IRS.
These requirements apply to Applicable Large Employers, or ALEs, which are employers with at least 50 full-time employees, including full-time equivalent employees. However, small businesses with fewer than 50 employees may be subject to the rules for ALEs if they are a member of a controlled group with 50 or more full-time employees.
Additionally, some provisions of the ACA apply to small businesses. Small businesses can purchase insurance through the Small Business Health Options Program, and they may be eligible for the Small Business Health Care Tax Credit. They may also be subject to certain reporting requirements.
Small businesses that choose to offer group health insurance will need to comply with certain requirements.
For example, according to HealthCare.gov, employers that offer health insurance to employees must offer it to all eligible employees. A waiting period for group health insurance is allowed, but it must not exceed 90 days. Employers must also provide employees with a standard Summary of Benefits and Coverage. If employers want to offer workplace wellness programs, any rewards that are contingent on the employee’s health must not exceed the limits. Currently, the limit is 30% of the cost of health coverage, or 50% for tobacco cessation programs.
Employers that offer health insurance must also comply with health care continuation laws on both the federal and state levels.
The Consolidated Omnibus Budget Reconciliation Act, or COBRA, creates federal requirements for continuation coverage after a qualifying event impacting employees, spouses, and/or dependents. Qualifying events include the death of an employee; an employee’s job loss or reduction in hours; an employee’s becoming eligible for Medicare; an employee’s divorce; and a child’s loss of dependent status.
Group health plans providing medical care are subject to COBRA requirements. This includes health insurance plans providing inpatient and outpatient hospital care, physician care, surgery, prescription drugs and other major medical benefits. It also includes dental and vision care. However, it does not include life insurance or disability insurance.
COBRA applies to private-sector group health plans offered by employers with 20 or more employees. For COBRA purposes, part-time employees are counted as a fraction of a full-time employee based on the number of hours worked. This means that many small employers are not subject to COBRA laws. However, many small employers are subject to state health coverage continuation laws, often called mini COBRAs. These laws vary from state to state, but they typically apply to employers with fewer than 20 employees. For example, in Utah, small employers that offer group health insurance must comply with the state’s health coverage continuation requirements.
The Family and Medical Leave Act, or FMLA, creates requirements for unpaid, job-protected leave for qualifying reasons. Under the FMLA, covered employers must provide eligible employees with up to 12 workweeks of leave in a 12-month period for reasons that include the birth of a child; the placement of a child for adoption or foster care; caring for a spouse, parent, son or daughter with a serious health condition; and a serious health condition that prevents the employee from doing his or her job. Leave is also available for certain situations involving family members who are on covered active duty or are called to active duty in the military, and 26 weeks of leave must be provided to employees who need to care for a family member who is a servicemember with a serious injury or illness.
The FMLA applies to private-sector employers with 50 or more employees. It also applies to schools and public agencies. However, smaller businesses may still have to meet requirements for reasonable accommodations, including schedule changes and leave, under the Americans with Disabilities Act, or ADA.
Additionally, some states have passed their own laws regarding family leave and disability leave. According to Investopedia, nine states have requirements or have passed legislation to require paid family and medical leave. These states are California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Washington. Hawaii also requires temporary disability insurance.
Long-term care insurance provides benefits to help people who need assistance with daily activities, such as eating and bathing. According to Forbes, Washington has created the first state-operated long-term care insurance program in the country. The program will be funded by a payroll tax of 0.58%.
This is a new law. The taxes won’t go into effect until 2022, and the first benefit claims won’t be possible until 2025. It is possible that more states will follow suit with similar programs of their own.
Many employers offer retirement savings programs to employees. Some states have created state-sponsored retirement plans, and participation may be mandatory for employers that do not provide their own retirement program. These laws may impact small business owners. For example, in California, employers with five or more employees must offer a retirement savings program or participate in the state’s CalSavers program.
Employers must comply with their state’s workers’ compensation insurance requirements. These laws vary from state to state, but they typically apply to both small and large employers. In many states, all employers must maintain coverage, even if they only have one employee.
Employers must also comply with the unemployment insurance requirements in their state. Employers must pay unemployment insurance taxes, and employees who lose their job may be eligible for benefits, although the exact eligibility requirements vary by state.
Medicare is a national health insurance program. Social Security is a national program that provides retirement benefits, disability benefits, and survivor benefits.
Both the employer and the employee must pay Medicare and Social Security taxes. The employee’s share of taxes should be deducted through payroll. Under the current tax rate, the employer pays 6.2% for Social Security, and the employee also pays 6.2%. For Medicare, the employer pays 1.45% and the employee also pays 1.45%.
In addition to the laws covered here, small business owners may need to comply with additional laws on the local or federal level.
Employers must remember to comply with state laws as well as federal laws. Employers with employees in more than one state may need to comply with multiple sets of employee benefits requirements.
Employers should also watch for new laws that are passed, as well as temporary requirements, such as the Families First Coronavirus Response Act, which created requirements for employers in 2020.
Small businesses may not be required to offer certain benefits under federal or state law. However, small business owners may still need to offer employee benefits if they want to compete with larger employers to attract top talent. Although simply offering a higher salary is an option, certain employee benefits and group insurance options may be tax free for employees, making a generous employee benefits package very attractive.
Group health plans, retirements plans, and a wide assortment of voluntary benefits can help employers attract and retain the right employees. In addition to offering health benefits and retirement benefits, other benefits to consider offering include life insurance, accidental death and dismemberment insurance, dental insurance, and vision insurance.
Altura can help. As an independent agency, we have relationships with most top carriers. We shop the market on your behalf and guide you through every step of the process.
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