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The ACA’s Employer Shared Responsibility Mandate

By Kenneth H. Bridges, CPA, PFS     March 2015

We believe (and certainly hope) that most of our business clients are regularly consulting with their health insurance advisors to be sure that they are in compliance with the Affordable Care Act (ACA).  We claim no particular expertise in this area.  With those caveats, here is a quick overview of the ACA’s employer shared responsibility mandate.

Effective for 2015, “applicable large employers” (generally defined as those with 50 or more full-time equivalent employees, but with a special transition rule for 2015) have essentially three options with respect to the employer shared responsibility mandate:

  1. Offer minimum essential coverage (MEC) that is “affordable” and provides “minimum value” to at least 95% of full-time employees and dependents, in which case no penalty is incurred;
  2. Offer MEC to at least 70% (95% beginning in 2016) of full-time employees and dependents that either is not affordable or does not provide minimum value, in which case a penalty of up to $3,000 per year is incurred for each employee receiving a premium subsidy on an exchange; or
  3. Not offer MEC at all, or offer to less than 70% (95% beginning in 2016) of full-time employees and dependents, in which case if any full-time employee receives a premium subsidy on an exchange the employer incurs a penalty of up to $2,000 per year for each full-time employee, excluding the first 30 employees (80 employees for 2015).

“Full-time” generally means at least 30 hours per week.  “Affordable” means that the employee’s required contribution does not exceed 9.5% of household income.  “Minimum value” means that the plan pays at least 60% of the covered healthcare expenses.

Under special transition rules, employers with 50 – 99 employees are generally relieved from compliance until 2016, and employers which have not offered dependent coverage in the past but are taking steps to do so are relieved from the requirement to provide dependent coverage until 2016.

As discussed further below, while the ACA rules are most applicable to employers with at least 50 employees, there are provisions which can impact smaller employers, so it is critical that all employers regularly consult with a health insurance professional.

Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP an Atlanta-based CPA firm.

This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice.  The article provides only a very general summary of complex rules.  For advice on how these rules may apply to your specific situation, contact a professional tax advisor.