Employers with less than 50 employees are NOT subject to the “employer mandate.” Employers with less than 50 employees that do offer coverage must offer an ACA-compliant plan unless the plan is grandfathered.
The Affordable Care Act (ACA) requires an employer with 50 or more Full-Time Equivalent employees to offer health coverage to employees or will be subject to the Employer Shared Responsibility provisions under section 4980H of the Internal Revenue Code.
Under these provisions, such employers may be subject to an Employer Shared Responsibility payment in the following circumstances:
- Not providing minimum essential coverage to their full-time employees and dependents;
- Not providing coverage that is affordable and that provides minimum value.
Although the requirements were effective beginning January 1, 2014, overall enforcement was delayed until January 1, 2015.
- Coverage that would cost an employee more than 9.5 percent of their annual household income is considered unaffordable.
- Three optional safe harbors exist to assist the employer in determining affordability:
- Form W-2 wages safe harbor,
- Rate of pay safe harbor,
- Federal poverty line safe harbor.
- A plan that covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the plan is considered to provide minimum value.
- The HHS and the IRS have published various methods that may be utilized to determine minimum value.
This information is provided for informational purposes only and should not be relied on as legal or tax advice.