How does the Affordable Care Act affect nonprofits?

As we touched on in a previous blog, offering competitive benefits is a serious tool for nonprofits to attract and retain top talent. But has their ability to be creative with benefits been affected by provisions in the affordable care act? Great question!

How are nonprofits being affected by the affordable care act?

Short answer - for the most part, the ACA affects nonprofits in basically the same way any other for-profit business of similar employee size is. But don’t click away just yet! There are a few things that affect only nonprofits or that nonprofits might be more sensitive to.

First, let’s go over the basics. There is no absolute requirement for businesses (nonprofit or for) over 50 full time equivalent employees to offer health insurance to their employees. BUT, there is a penalty and avoiding that penalty is probably a good move. Penalties are no bueno for any company, but are especially unwelcomed for non-profits who hover between red and black on an almost daily basis.

The penalty can be up to $2,000 per employee; however, the first 30 employees are not part of the calculation. Read even more about the penalties for individuals and employers.

If your business has 50 or less Full-Time Equivalent Employees (FTEs), then you’re in the clear. You won’t face any penalties for offering or not offering health insurance. Even better if you’re 25 or less; you might be eligible for a health insurance tax credit if you do offer your employees insurance.

Though that credit, along with every other aspect of the ACA, is impossible to figure out. Nonprofits can apply for these credits if you’re less than 25 FTEs, wages are less than $50,000 AND premium sharing meets “certain standards” (they couldn’t be more vague if they tried). For tax-exempt nonprofits the credit is actually a refund on quarterly payments the nonprofit has made to the IRS for income tax withholdings or Medicare withholdings from employee wages.

Also, nonprofits can claim the small business health care tax credit from previous years (it’s been available since 2010) as long as your business was eligible in whatever year you’re trying to get the credit.

*figure out FTEs here

*AND Dominion has a FTE calculator of its own

Request a quote to see more! 

Health Insurance Exchanges

A constant worry is that nonprofits aren’t able to purchase benefit plans for their employees at a competitive cost. Exchanges are designed to pool individuals and employers together to leverage the purchasing power of a larger group.

Exchanges are designed to be set up at the state level, and some states will establish their own state-based exchange. Individuals and employers in states that opt out of creating an exchange will be able to join a federal exchange. There is also a hybrid State-Federal Partnership exchange model.

Rest assured, there aren’t different policies for for-profit and nonprofit. They’re both mandated under the same law and have almost exactly the same guidelines. However, the main difference when talking about these two different ideologies is what I’m calling ‘sensitivity’. I firmly believe nonprofits will have a more difficult time adjusting to the ACA.

Every aspect of running a nonprofit is already under a microscope to assurance compliance with exemption requirements, adding in something as confusing as the ACA makes their margin for error even slimmer. And these are companies/foundations that don’t have an excess of capital to throw away, so penalties can really hit them hard.

So if you’re asking the question of how the ACA is affecting nonprofits or wondering if nonprofits are affected differently than for profit, the answer is yes…and no.