Employer Shared Responsibility Provisions of Obamacare
Employer Mandate Requirements effective January 1, 2015
Confused about the requirements of Affordable Care Act (Obamacare) as it relates to larger employers?
This article provides general information about what employers must do and when to comply with the health care law. The regulations are extremely complicated, and there are many variables. This is a general discussion, with links provided to additional information. Before making any decisions or taking any action relating to the information discussed, be sure to discuss with your or employee benefit specialist.
What is Employer Shared Responsibility and What Businesses are Affected?
There are several steps in the process of determining whether your business is subject tothe Employer Shared Responsibility (ESR) provisions of the Affordable Care Act (ACA).
First, you employ ia specific number of employees. The Employer Shared Responsibility (ESR) requirement is effective January 1, 2015 for employers with 100 or more employees, and in 2016 for employers with 50 to 100 employees. An employee is considered full-time if he or she works an average of at least 30 hours a week.
Second, if your business comes under the ESR provisions, you must offer affordable health coverage that provides a specified minimum level of coverage to your full-time employees and their dependents. If you don't offer this coverage, you may be required to pay a penalty. Note that the trigger for this penalty is if one or more employees receives a premium tax credit for purchasing individual coverage through a state or federal exchange.
Insurance and Payments Requirements
Employers who meet the Employer Shared Responsibility requirements (see below) must either pay for insurance coverage that meet specified minimum levels for employees and their families or make an annual payment. You must be able to show that you have offered this coverage to employees.
Third, you, as an employer, will not be liable for an Employer Shared Responsibility payment unless at least one full-time employee receives a . (A premium tax credit is available to individuals with low or moderate income to help them purchase insurance through the Marketplace Exchanges.) The IRS will inform employers of any employee receiving a premium tax credit.
If an employer is subject to ESR requirements as described above, the employer must:
- offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents)
- Offer health coverage or offers coverage to fewer than 95% of its full-time employees and the dependents of those employees OR
- Make ESR payments.
Health Coverage/Health Insurance Requirements
The health insurance plan provided by the employer must be:
- Affordable. To be affordable, the employee’s share of the premium for employer-provided coverage would cost the employee less than 9.5% of that employee’s annual household income. As you can imagine, this is a complicated calculation.
- Provide minimum value. The IRS says, "A plan provides minimum value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan."
Employer Shared Responsibility Fines and Penalties
Fines and penalties must be paid by employers if not enough employees are eligible for coverage and if the coverage is unaffordable or doesn't meet minimum levels of coverage.
These regulations are complicated, and many specific details and exemptions apply. Read more about Employer Shared Responsibility on this web page: .
Reporting Requirements for Large Employers
Beginning in 2015, employers are now required to keep records prepare