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Updates Also Include Payment Information

The Internal Revenue Service has updated its Q&As on the Affordable Care Act's employer shared responsibility (pay or play) requirements, including the penalty amounts that will apply for 2020. Each year, penalty amounts are increased based on the premium adjustment percentage for the year.

For 2020, the adjusted penalty amounts are $2,570 (for employers not offering coverage) and $3,860 (for employers offering coverage that is not affordable or does not provide minimum value). The updated Q&As also address the following topics on making a payment:

  • Employer responses to Letter 226J (the letter the IRS uses to propose and assess payments);
  • How to make a payment;
  • IRS notification to employers of potential penalty liability.

Click here to view the Q&As in their entirety.

ACA Affordability Contribution Rate Set at 9.78% for 2020

New Figure Marks Decrease from 2019

Under the employer shared responsibility ("pay or play") provisions of the Affordable Care Act, applicable large employers—generally those who have 50 or more full-time employees (including full-time equivalent employees)—may be subject to a penalty if they do not offer affordable coverage that provides minimum value to their full-time employees and their dependents.

For plan years beginning in 2020, the Internal Revenue Service has announced that coverage will generally be considered affordable if the employee's required contribution for the lowest-cost self-only health plan offered is 9.78% or less of his or her household income for the taxable year. For plan years beginning in 2019, the applicable percentage is 9.86%.

Given that employers are unlikely to know an employee's household income, they may use a number of safe harbors to determine affordability, including reliance on Form W-2 wages.

In Indiana...

If the employee is involuntarily terminated, the final paycheck is due on the next regularly scheduled payday.

Employee Quits

If the employee quits, the final paycheck is due on the next regularly scheduled payday.  If an employee quits and the employee's whereabouts or address are not known to the employer, the employer need not pay the employee until:

  1. Ten (10) business days have elapsed after the employee has made a demand for the wages due to the employee;  or
  2. The employee has furnished the employer with the employee's address where the wages may be sent or forwarded.

Payment of Unused Benefits on Termination

Indiana law does not address the payment of unused benefits upon termination. Generally speaking, an employer who has agreed, either in a written or oral policy or by practice, to pay employees for accrued but unused time off should include such payment in the final paycheck (whether or not a state has enacted a specific law to that effect).

More information regarding final paycheck requirements is available from the State of Indiana (Section 22-2-9-2).

Please Note: The state laws summaries featured on this site are for general informational purposes only. In addition to state law, certain municipalities may enact legislation that imposes different requirements. State and local laws change frequently and, as such, we cannot guarantee the accuracy or completeness of the information featured in the State Laws section. For more detailed information regarding state or local laws, please contact your state labor department or the appropriate local government agency.

Eligible small businesses and tax-exempt employers can take the small business health care tax credit for two consecutive years.

Eligibility

An employer is eligible for the credit if:

  • It had fewer than 25 full-time equivalent employees (FTEs) for the tax year.
  • It paid at least 50% of the premium cost for single health care coverage for each employee.
  • The average annual wages of its employees are less than a specified amount adjusted for inflation each year (for tax year 2018, the amount was $54,000).
  • It paid premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace (or qualify for an exception to this requirement).

Note: Employers in Hawaii are not eligible for the small business health care tax credit. 

The Credit

In general, the credit amount works on a sliding scale. The smaller the employer, the bigger the credit. The maximum credit is 50% of premiums paid by eligible small businesses and 35% of premiums paid by eligible tax-exempt organizations.

If the employer provides more than one type of coverage, or if the employer's health insurance provider does not charge the same premium for all enrolled employees, the employer may qualify even if he or she paid less than 50% of the premium cost for some employees.

Consult the Small Business Health Care Tax Credit Estimator and IRS Q&As for information on how to calculate the credit.

FTEs and Average Annual Wages

For purposes of the health care tax credit, one full-time equivalent employee (FTE) generally equals 2,080 hours per year. (This is different from other provisions of the Affordable Care Act that count 30 hours per week as one FTE.)

To arrive at the number of FTEs, divide the total hours of service for which the employer pays wages during the year (not more than 2,080 hours for any employee) by 2,080.

An employee's hours of service include each hour for which he or she is paid, or entitled to payment, during the employer's tax year. Hours of service may be calculated using: actual hours of service, "days-worked equivalency," or "weeks-worked equivalency."

To calculate average annual wages, divide the total FICA wages paid by the employer during the tax year (not considering wage base limits) by the number of FTEs for the year. The result is rounded down to the nearest $1,000.

How to Claim the Credit

Businesses claim the credit on their annual income tax returns by attaching Form 8941 showing the calculation of the credit. Small business employers who did not owe tax during the year may be able to carry the credit back or forward to other tax years.

Tax-exempt organizations claim the credit by filing Form 990-T with an attached Form 8941 showing the calculation of the credit. The credit is refundable for tax-exempt employers, so the employer may receive a refund even if it has no taxable income. However, the amount of the credit cannot be more than the total amount of income and Medicare tax the employer is required to withhold from employees' wages for the year and the employer share of Medicare tax on employees' wages for the year.

Employers may be required under both federal and state law to retain certain types of records relating to their current and former employees. View the Recordkeeping Requirements by Federal Law for detailed information about the federal requirements.

Indiana requires employers to maintain the following types of records:

Wages/Hours/Payroll

  • The following information must be retained for each employee:
    • Name;
    • Address;
    • Occupation;
    • Daily/weekly hours worked; and
    • Wages paid each pay period.

Safety and Health/Workers' Compensation

Record Keeping Requirements in Indiana
Click to enlarge.
  • Employers must keep a record of all disablements caused by occupational disease, fatal or otherwise, received by employees in the course of their employment.
    • A written report must be made to the insurance carrier within 7 days of a disablement that causes the employee's death or absence from work for more than 1 day.
  • Employers must report to IOSHA/OSHA anytime an employee is hospitalized within 24 hours. This does not include employees taken in for testing or observation only. Employers must also now report any amputation or loss of an eye within 24 hours. View the reporting rules infographic here.
  • Employers are also required to maintain accurate records of employee exposures to potentially toxic material or harmful physical agents.

Child Labor

  • Job permits for workers under age 18 must be retained for the duration of employment.

Discrimination

  • An employer must keep records of the ages of its employees.

Employee Access to Records

  • Employees may access records pertaining to hazardous substance exposures.

Please Note: The state laws summaries featured on this site are for general informational purposes only. In addition to state law, certain municipalities may enact legislation that imposes different requirements. State and local laws change frequently and, as such, we cannot guarantee the accuracy or completeness of the information featured in the State Laws section. For more detailed information regarding state or local laws, please contact your state labor department or the appropriate local government agency.

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