IRS Provides Information on ACA Employer Shared Responsibility Payments

The Internal Revenue Service (IRS) has published a fact sheet with details on employer shared responsibility payments that may be owed under the Patient Protection and Affordable Care Act (ACA).  The possibility of making such payments only applies to employers that meet the definition of “applicable large employer” (an employer with 50 or more full-time equivalent employees working an average of at least 30 hours per week) where any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction payment. Generally, this may occur where either:
 
  • the employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; or

 

  • the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that either is unaffordable relative to an employee’s household income or does not provide minimum value.
 
Where a covered employer fails to offer minimum essential coverage to full-time employees and their dependents, it may owe a shared responsibility payment.  The annual payment will be $2,000 for each full-time employee (regardless of whether each employee received a premium tax credit), after excluding the first 30 full-time employees from the calculation.  The $2,000 amount is indexed for inflation and may vary slightly from year to year.  There is transition relief available for calculating the employer shared responsibility payment for 2015.  According to the Fact Sheet, “for 2015 (and the months in 2016 that are part of the 2015 plan year for an employer with a non-calendar year plan year), if an ALE with 100 or more full-time employees (including full-time-equivalent employees) is subject to this payment, the number of full-time employees used to calculate the employer shared responsibility payment will be reduced by 80 rather than 30 (which is the standard reduction).”
 
A covered employer may also owe a shared responsibility payment where it offers minimum essential coverage that is unaffordable or does not provide minimum value.  If an employer owes this type of payment, it will be calculated in the amount of $3,000 for each full-time employee who received a premium tax credit.  This amount is indexed for inflation and may vary slightly from year to year.
 
The Fact Sheet explains that where an employer is subject to the first type of shared responsibility payment described above (related to the failure to offer minimum essential coverage), it will not be subject to the second type of shared responsibility payment (related to the failure to offer minimum essential coverage that is affordable and provides minimum value).  Further, where an employer is required to make the second type of shared responsibility payment, the total amount of such payment cannot exceed the amount an employer would owe if it had been liable for failing to offer minimum essential coverage.