The Affordable Care Act and it's Impact on your Business


The year 2015 marks a milestone in the implementation of the Affordable Care Act. This year, applicable large employers will be subject to both the 1095-C reporting requirements and employer mandate penalties if they do not provide minimum essential health coverage to their full-time employees and dependents.  

An applicable large employer has an average of 50 or more full-time equivalent employees. This total is determined based on the average count per month in the prior year. Part-time employees are counted by hours worked, so part-time hours are grouped to determine full-time equivalents. 

For owners who have only one business interest the calculation will not be too difficult. However, business owners who own more than one entity may not be aware that they are subject to the IRS Controlled Group Rules under Section 414(b) and (c). Applicable large employer status is calculated based on the number of full time equivalent employees between all businesses in the controlled group.  

Determining whether your business is part of a controlled group is a complicated process: 

Common ownership is applied when entities share at least 80% ownership in common and hold controlling interest-and this can consistent of up to five different partners owning just 20% each, or "family attribution"-in which spouses and children are automatically attributed interests owned by one family member. 

An affiliated service group is created when a company is formed to provide services to another company and shares a common owner or partner. In certain situations the ownership interest can be as low as 10% and the entities will still be considered related.  

Management group rules come into play when the performing organization's principal business is the performance of management services on a regular and continuing basis to a recipient company. No common ownership is required to be considered a controlled group. 

While the ACA requirements are a very important issue due to the large penalties that could be levied, it is also important to note that these controlled group rules also apply to fairness testing for pension plans, and that the IRS is looking at 401k and Simple IRA plans in controlled group situations. 

If you think you might have a situation where the controlled group rules apply, make sure to consult with your CPA as soon as possible.

Contact Osborne Rincon, CPAs at 760-777-9805 for more information.