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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”
o
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”)
o
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 Excise 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
Note: Affordability is based on the lowest cost employee contribution for single coverage.
There are a number of tests for affordability, including ensuring a minimum annual pay or
ensuring a minimum hourly rate of pay. Each minimum is calculated based on that lowest
cost single contribution. There’s also a special affordability safe harbor when the ratio of
the minimum affordability annual pay to the single FPL is 100% or less. Based on 2016
updates, the threshold to meet the FPL safe harbor is $95.63 per month.
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