In March 2010 comprehensive health care reform came to the United States in the form of the Affordable Care Act (ACA). The primary goals of the ACA include making affordable health insurance accessible to more people, expanding Medicaid to cover more low-income adults, and supporting innovative medical care methods. With the passage of the ACA came a strong mandate for employers with 50 or more full-time employees in the previous calendar year: provide insurance to all full-time employees, and prove it.
This clause is known as the Employer Shared Responsibility Provision. This is often referred to as the 'employer mandate.' These responsibilities include providing 'minimum essential coverage' that is affordable to their full-time employees and sending reports about health insurance to those employees and to the IRS. Coverage is considered 'affordable' if employee contributions for employee-only (no dependents) coverage do not exceed a certain percentage of an employee’s household income. For 2018, it will be 9.56%. Tax-exempt organizations and government entities are not free from the employer mandate either, should they employ 50 or more full-time employees.
With the employer mandate, comes employer shared responsibility penalties. These are placed upon applicable employers who fail to offer health insurance to their full-time employees. These are still in place as of August 2017. Rogue employers are discovered by the IRS when employees report a tax credit on their income tax returns for health insurance they purchased themselves through the Health Insurance Marketplace. The IRS will mail them a notice of their tax liability, giving the employers a chance to respond before the IRS demands payment. Employers have 30 days to respond, either explaining why the insurance was not provided or paying the fine. The amount of the penalty will ultimately depend on whether or not the employer offered coverage to at least 95% of its full-time staff. Employers who fail to do so will be subject to a penalty of $2,260 per full-time employee minus the first 30 employees. Employers who do not provide 'affordable' coverage can be subject to these fines, too.
More questions about the ACA? Head to PayrollTalk and check out the ACA Challenges, Successes, and Comments category.