Introduction to Employer Shared Responsibility
The Employer Shared Responsibility provisions, also known as the employer mandate, require certain employers to offer health coverage to their full-time employees or face penalties. These provisions are part of the Affordable Care Act and are designed to encourage employers to provide health insurance to their employees.
The final regulations provide guidance on which employers are subject to the mandate, how to determine which employees are eligible for coverage, and how to calculate the penalties for non-compliance. Employers with 50 or more full-time employees, including full-time equivalent employees, are generally subject to the mandate.
Determining Applicable Large Employers
To determine whether an employer is an applicable large employer, the employer must calculate its number of full-time employees, including full-time equivalent employees. This calculation is based on the average number of full-time employees during the preceding calendar year.
Employers with 50 or more full-time employees, including full-time equivalent employees, are considered applicable large employers and are subject to the employer mandate. Employers with fewer than 50 full-time employees are not subject to the mandate.
Offering Minimum Essential Coverage
Employers subject to the mandate must offer minimum essential coverage to their full-time employees and their dependents. Minimum essential coverage includes major medical coverage, such as hospitalization, surgery, and physician services.
Employers can offer minimum essential coverage through a group health plan or by reimbursing employees for the cost of individual health insurance coverage. The coverage must be affordable, meaning that the employee's contribution to the premium cannot exceed 9.86% of the employee's household income.
Calculating Penalties for Non-Compliance
Employers that fail to offer minimum essential coverage to their full-time employees may be subject to penalties. The penalties are calculated based on the number of full-time employees and the average annual premium for self-only coverage in the employer's rating area.
The penalty for failing to offer coverage is $2,320 per full-time employee, minus the first 30 employees. The penalty for offering coverage that is not affordable or does not provide minimum value is $3,480 per full-time employee.
Reporting Requirements
Employers subject to the mandate must report certain information to the IRS and to their employees. The reporting requirements include providing a statement to each full-time employee that includes information about the health coverage offered by the employer.
Employers must also file an annual return with the IRS that includes information about the health coverage offered to full-time employees. The return must be filed by February 28 of each year, or March 31 if filed electronically.
Frequently Asked Questions
What is the purpose of the Employer Shared Responsibility provisions?
The purpose is to encourage employers to provide health insurance to their employees.
Which employers are subject to the Employer Shared Responsibility provisions?
Employers with 50 or more full-time employees are subject to the provisions.
What is minimum essential coverage?
Minimum essential coverage includes major medical coverage, such as hospitalization and physician services.
How are penalties calculated for non-compliance?
Penalties are calculated based on the number of full-time employees and the average annual premium for self-only coverage.
What are the reporting requirements for employers subject to the mandate?
Employers must provide a statement to each full-time employee and file an annual return with the IRS.
When are the reporting requirements due?
The annual return must be filed by February 28, or March 31 if filed electronically.