Employer Shared Responsibility Overview

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Effective January 1, 2015, applicable large employers (who in general have 50 or more full-time employees, including full-time equivalent (FTE) employees) who have at least one full-time employee obtaining a premium tax credit for coverage) may be assessed a penalty if:

  • The employer fails to offer employees and their dependents health insurance coverage that meets the established minimum essential coverage requirements, or
  • The employer offers such coverage and it is deemed unaffordable or does not provide minimum value.

The FTE calculation is based on both full- and part-time employees. A dependent is defined as a child up to age 26 and does not include a spouse.

In general, whether an employer is subject to the ESR provision is based upon the number of employees in the previous calendar year; therefore, applicable employers should currently track employees hours of service to help them make these determinations.

Note: There are specific rules and "safe harbors" set up for clients whose health insurance plans run on a fiscal rather than calendar year basis, as long as that fiscal year plan was in place as of December 27, 2012. These employers will not be subject to a penalty for not offering coverage on January 1, 2015, as long as they begin offering coverage to eligible employees on the first day that the plan starts in 2015.

Applicable Large Employers with 50-99 full-time employees may be eligible for a one-year delay in enforcement of the provisions until 2016. However, they must meet certain conditions outlined in the regulations to qualify for the transition relief and must certify in ESR reporting that they have met these conditions. If not, may still be liable for potential penalties if one of their non-covered employees receives a premium tax credit from a health insurance marketplace or if the coverage offered is not affordable or does not provide minimum value.