Employer Shared Responsibility in 2015 Under the Affordable Care Act - Capstone Brokerage

Businessman's hand showing diagram on financial report with pen.

By: Robert Pusateri, Capstone Brokerage Benefits Constulatant January 27, 2015

Part of the Affordable Care Act is a provision that requires employers to either offer health insurance, or face a penalty (Penalty A). The employer mandate has been a topic that has been pushed back for many businesses. Now that 2015 is here, employers with over 50 full time equivalents (FTE) employees are subject to the “Employer Shared Responsibility” fee or payment. (Transition Relief for employers with 50-99 FTE’s in 2015).

The fee is actually pretty simple to calculate:

Full-time Employees minus (80) multiplied by 1/12 of the annual $2,000 penalty, if at least one full-time employee receives a premium tax credit/subsidy for that month.

So what does that mean? Let me help break it down:

1. Full time employees minus 80 means that in 2015 the first number is the number of full time employees less 80. Employee exclusion moving to minus 30 employees in 2016.

a. Example: a company has 150 full time employees (FTE); So 150 less 80 would equal 70.

The annual penalty is $2,000 per employee, since we are figuring the monthly penalty it would be 1/12 of the $2,000, so each month would cost the employer $166.66 per employee.

2. So the above example would have a monthly penalty of 70 X 166.66= $11,666.66 or $140,000 annually.

The “Penalty A” fee is calculated monthly based on the number of full-time employees employed for that specific month. So be prepared for fluctuation in the fee month to month.

Although the calculation may seem simple, the rules to who it applies to are not. First, the Employer Shared Responsibility ONLY applies to employers with 50+ full-time employees (work 30+ hours weekly or 130 hours a month), for now. The employer is subject to a fee ONLY if they do NOT offer the minimum essential coverage to 70% of the full time employees. If both of these situations are true, then the business is subject to the Employer Shared Responsibility Fee starting in 2015.

In most cases, it is better for a business to offer insurance benefits to their employees that meet the minimum essential coverage because it is tax deductible. The small or large group medical market includes exchanges, coverage available under a grandfathered plan or through a qualified government group plan.

For an in-depth look at your large or small business health insurance needs, it is always smart to look for a qualified insurance consultant, or agent, that has an in-depth knowledge of the Affordable Care Act. A qualified Insurance agent will be able to explain how the ACA will affect you and your business. Many businesses will find that since the passing of the ACA offering employee benefits goes beyond traditional arguments such as keeping employees happy, boosting positive moral, as a great recruiting tool, and retaining key employees. Now, under the ACA offering full-time employees healthcare benefits may also prove to be less expensive then paying the Employer Shared Responsibility Fee , a non tax deductible business expense.