Church Pension Group | Affordable Care Act

The Good Steward

The Affordable Care Act: What Every Nonprofit Should Know

October, 2020

The Patient Protection and Affordable Care Act (Affordable Care Act, or ACA (also called Obamacare)) has been in effect for about a decade now. The ACA includes provisions that impose assessments on larger employers unless they offer affordable healthcare benefits that provide minimum value to full-time employees and their children.

Various adjustments have been made to the ACA during its existence, and it’s important that all organizations, including not-for-profits, keep up with its mandates to ensure that they are in compliance.

The ACA’s Employer Shared Responsibility Provisions affect nonprofits and/or religious organizations deemed “applicable large employers,” those with 50 or more full-time employees. If your organization has a smaller workforce, then it may be exempt. For purposes of determining whether your organization is large, medium or small, a 30-hour work week is considered full-time and a part-time employee counts as part of a full-time employee based on the number of hours worked.

Here are three important points that religious organizations should know:

  1. Large nonprofits have more requirements.

If your organization has 50 or more full-time employees and doesn’t offer affordable and minimum essential coverage to all of its full-time employees, it may incur an Employer Shared Responsibility Payment. The calculation varies based on a number of factors, including the number of full-time employees eligible for such coverage. You should direct your concerns about whether your organization may be subject to this payment to legal counsel and/or tax accountants.

  1. Minimum value can be calculated.

In order to be in compliance, the offered health insurance plan should cover “at least 60% of medical services for a standard population,” and its benefits should “include substantial coverage of physician and inpatient hospital services,” according to Healthcare.gov.  Most plans that provide hospitalization and major medical coverage meet this requirement.

  1. Affordability should be taken into account.

According to the Internal Revenue Service, “[e]mployer-provided coverage is considered affordable…if the employee required contribution is no more than 9.5% (as adjusted) of that employee’s household income.”

Because employers may not know their employees’ total household incomes, there are three “safe harbors” employers can use to determine affordability.

The ACA Employer Shared Responsibility Provisions are complex, and the information provided here does not cover the intricacies. Be sure to consult with appropriate professional experts if you have questions regarding what your nonprofit is required to supply and for what tax incentives it is eligible.