Employer Shared Responsibility (ESR) Reporting Checklist
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Last Updated: 07/28/2015
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Updated: June 8, 2016
Employer shared responsibility (ESR) provisions under the Affordable Care Act (ACA) are now in effect. If you are an applicable large employer (ALE), you'll need to make sure you provide detailed informational reporting to the IRS at tax time.
ESR provisions went into effect for ALEs in 2015. In general, ALEs are employers that have 50 or more full-time employees, including full-time equivalents, during business days in the previous year. These ALEs must offer their full-time employees the opportunity to enroll in qualified health insurance coverage that meets the minimum value and affordability standards established in the ESR provisions. If they fail to do so, and/or fail to submit the required reporting in proper form, they may face significant penalties.
What You Need to Remember for ESR Reporting
- ALE status—In general, an ALE is any employer with an average of 50 or more full-time employees, including full-time equivalents, during business days of the previous calendar year. A full-time employee is one who works an average of 30 hours per week or 130 hours per month. Your ALE status is based on workforce hours from the previous year. Please note, different rules can apply to new businesses.
- Offers of coverage—The ESR provisions require that ALEs offer minimum essential coverage to at least 95 percent (or all but five) of full-time employees and their dependents in order to avoid one of the potential penalties. Keep in mind that the employer is still at risk for being assessed another penalty for not offering coverage that meets minimum actuarial value or affordability requirements to all full-time employees, if any of these employees not offered adequate and affordable coverage receive a premium tax credit.
- Minimum essential coverage (MEC) and minimum actuarial value—Most broad-based medical plans meet the requirements for MEC and minimum value. A plan must cover at least 60 percent of the cost of medical expenses to qualify as meeting the minimum actuarial value requirement.
- Affordable coverage—The IRS has offered three optional safe harbor methods to help you determine this amount:
- Form W-2 Safe Harbor
- Rate of Pay Safe Harbor
- Federal Poverty Line Safe Harbor
For specifics about the three affordable safe harbors, visit the IRS website.
- Forms to file—You will need to file forms 1094-C and 1095-C by May 31, 2016 (or June 30, 2016 if you file electronically).
- Forms to employees—In general, you must provide all employees with copies of form 1095-C by January 31 of the filing year. For 2016, the deadline is March 31. The form details what type of coverage they were offered and for which months as well as the cost of the least expensive employee contribution to employee-only option offering MEC and minimum actuarial value.
- Penalties—If you fail to meet the requirements of the ESR provisions of the ACA, you may face penalties. You may also face penalties for not filing on time.