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1│ ACA R
EVIEW
Updated December 2016
Employer Shared Responsibility Mandate Overview:
Applicable to employers employing 50 or more full-time plus full-time equivalent employees
Risk of excise tax if adequate and affordablecoverage not offered to individuals working 30-
plus hours per week
Determining ALE status: Average number of employees and their hours of service in
preceding year determines ALE status for the current year
Employee defined as “common-law employee”
•
Does not include leased employees, sole proprietor, partner in partnership, 2-
percent S-Corp shareholders, or real estate agents and direct sellers (“IRC
Section 3508 employees”)
•
Full-time employee (FTE): One who works average of 30 hrs/week (130
hrs/calendar month = 30 hrs/week)
Employer Shared Responsibility Penalties:
Potential Tax Exercise Tax Penalties
‘No Coverage’ Excise Tax IRC §
4980H(a)
‘Inadequate or Unaffordable’ Excise Tax
IRC § 4980H(b)
2015
$2,080
2015
$3,120
2016
$2,160
2016
$3,240
2017
$2,260
2017
$3,390
2018
(proposed)
$2,320
2018
(proposed)
$3,480
Steps in Assessment and Collection of IRS Penalties
1.
Following tax returns filed by both individuals and employer, IRS will calculate
potential ESR payment and contact employer of potential liability
2.
Once IRS contacts employer, the employer will have opportunity to respond to IRS
inquiry prior to assessment or “notice and demand” for payment
3.
IRS would then determine liability and send notice and demand for payment to
employer, if applicable
Employer Appeals to Marketplace Determinations
Employers may receive notification from marketplace indicating one (or more) employees
applied for marketplace coverage and deemed eligible for premium tax credit due to
employer failing to offer MEC that meets minimum value
•
Marketplace determinations do not trigger ESR penalties
Employer has right to appeal marketplace determination by following Center for
Medicare and Medicaid Services’ process
•
No standard format but appeal should be written and submitted within
timeframe indicated in notice from marketplace
Affordability Standard for purposes of employer’s risk of excise tax- percentage amount
tied to inflation:
9.56 percent in 2015
9.66 percent in 2016
9.69 percent in 2017
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