United States

Manufacturers prepare for Affordable Care Act requirements


Manufacturing companies with at least 50 full-time or full-time equivalent employees may face hefty tax penalties if they do not comply with new provisions of the Affordable Care Act (ACA), which go into effect in 2015.

Companies that do not offer health insurance to at least 95 percent of their full-time employees (employees who work at least 30 hours per week on average) could be assessed penalties by the IRS of $2,000 per full-time employee.  Even if a company offers health insurance to all of its full-time employees, it could still be subject to penalties if the plan fails to meet new minimum value and affordability standards.  In this case, the penalty is $3,000 for each employee who declines the employer plan and purchases health insurance through a state exchange with federal tax credits.

A plan provides minimum value if, after considering the combinations of co-pays and deductibles provided, the plan is designed to pay at least 60 percent of the covered charges under the plan.  A plan is affordable if an employee's cost for self-only coverage does not exceed 9.5 percent of the employee's household income.  An employer can use 9.5 percent of the employee's Form W-2, Box 1 wages or rate of pay as a proxy for household income.

Many manufacturers are already anticipating an increase in healthcare costs in the coming year.  According to the 2013 McGladrey Manufacturing and Distribution monitor executives are most concerned about health care costs as the Affordable Care Act is implemented, anticipating an average in crease of 10.2 percent in health care costs.  Additionally, approximately 1 in 10 businesses expect health care costs to increase by 20 percent or more in the next 12 months.

Manufacturers should analyze their workforce and health plans now to determine if they comply with the ACA.  For more information about the ACA, read "The Affordable Care Act:  What's next for employers?"