ACA: Employer Mandate

Penalty rates over the years

2015: Adjusted $2000 amount is $2080 and the adjusted $3000 amount is $3120. 2016: Adjusted $2000 amount is $2160 and the adjusted $3000 amount is $3240. 2017: Adjusted $2000 amount is $2260 and the adjusted $3000 amount is $3390. 2018: Adjusted $2000 amount is $2320 and the adjusted $3000 amount is $3480.

Affordability

Employee contributes no more than about 9.5% (till 2018 and 9.86% in 2019) of their total wages for self-coverage.

Employer Mandate (ACA)

Employers with 50+ "full - time equivalent "employees (FTEs) must offer affordable and "minimum value" health insurance coverage to 95% of their (FTEs) and their dependents below 26 years of age, or be subject to penalties. Part of the health care reform law (2015).

Impact of the Employer Mandate

Goal: Employers provide health coverage to more employees. Speculation: Encourage employers to cut hours and reduce full-time employment in order to avoid having to provide health coverage. But, only .09% of employees work for firms that could be fined for not providing them health care. Reality: i. Did not cause a significant number of full-time jobs to be cut or become part-time. ii. Did not cause many more people who were not covered to become covered. The law could become more impactful if the work-day limit were raised to 40 hours a week, leading to a shift towards the part - time employment. This could result in many more employees losing health coverage from their employers. Thus, raising the threshold to 40 hours would place many more workers at risk of having their hours reduced. Ineffective at collecting violation penalties due to legally uncertain language.

Final Penalty Decision

IRS issues an initial Letter 226-J to employers to notify them that they may be liable for a penalty. These letters assess a financial penalty, called the Employer Shared Responsibility Payment (ESRP), if the IRS believes the employer did not satisfy their Employer Mandate requirements. If you disagree with the proposed penalty, you must provide a full explanation of your disagreement and should take immediate action to develop a response to the IRS within 30 days of the letter date. It is important for employers to maintain documents and records to demonstrate compliance, so they may respond to the Letter 226-J with accurate data and data corrections on previously reported Forms 1095-C, if applicable. The IRS will reply with an acknowledgement letter (Notice 220-J) informing you of their final determination.

Liabilities

If an employee receives subsidized coverage, the employer should be notified by the Health Insurance Marketplace. The employer will then be provided an opportunity to respond and appeal if the employee was offered coverage that meets the minimum value and affordability standards. This is because having an employee claim subsidized coverage may trigger a penalty on the employer.

Dependents

Include children up to age 26, excluding stepchildren and foster children. Spouses are not considered dependents in the legislation, so employers are not required to offer coverage to spouses.

Who is responsible for penalizing the employers?

Internal Revenue Service (IRS) Code 6056 All employers must, therefore, report information regarding the health care coverage that they offer to their full-time employees to the IRS annually. Reporting will include information on all employees who were offered and accepted coverage, and the cost of that coverage on a month-by-month basis. Employers that do not submit an annual IRS return or provide individual statements to all full-time employees may be subject to a penalty.

Minimum value

Should cover at least 60% of total allowed costs.

What are the applicable penalties?

The penalty associated with the employer mandate is often called a "free-rider" penalty because it is triggered when an employer's low-income employee "free-rides" on the federal government to obtain health care coverage. If at least one full-time employee receives the premium tax credit for purchasing coverage through the marketplace, it triggers a penalty for the employer. The severity of the penalty depends on whether the employer offers coverage to at least 95% of its full - time employees. Employers who fail to do so may be fined as much as $2320 dollars per employee. The penalty varies every year based on inflation. They may also be penalized if the coverage does not meet ACA standards. For example, employee contributions for self coverage cannot be more than 9.5% of their income.

Full - time equivalent employees (FTEs)

Total # of hours worked by part - time employees in a month divided by 120.

Full - time employees

Work minimum 30 hours/week or 130 hours/month.

Why will a full - time employee receive the premium tax credit?

a) Minimum essential coverage offered was not affordable. b) Did not provide "minimum value". c) Because the employee was not one of the at least 95% of full-time employees offered minimum essential coverage.