ACA Compliance

How to Avoid the ACA Employer Shared Responsibility Fee

The Affordable Care Act (ACA) includes requirements for employers as well as individuals. Our eBenefits team is here to keep you informed on these requirements. Read on for details on the Employer Shared Responsibility fee — and ways you can avoid it.

What is the Employer Shared Responsibility fee?

This is a fee large employers (50 or more FTE employees) must pay if they do not offer full-time employees and their children affordable health insurance coverage that meets certain standards.

How does an employer incur the Employer Shared Responsibility fee?

Applicable employers must pay penalties if at least one of their full-time (FT) employees (working 30+ hours per week) gets a premium credit/cost-sharing reduction through a Marketplace. An individual may be eligible for a premium credit/cost-sharing reduction if the employer:

· Does not offer health care coverage.

· Offers coverage that is not “affordable” (the employee’s annual premium for self-only coverage must not exceed 9.5 percent of household income).

· Offers coverage that does not provide “minimum value” (the plan’s share of allowed costs under the plan must be at least 60 percent).

An employer will be liable for an excise tax payment only if:

· The employer does not offer health coverage or offers coverage to less than 95 percent of its full-time employees, and at least one of the full-time employees receives a premium tax credit to help pay for coverage on an exchange or

· The employer offers health coverage to at least 95 percent of its full-time employees, but at least one full-time employees receives a premium tax credit to help pay for coverage on an exchange, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either unaffordable to the employee or did not provide minimum value.

How is the Employer Shared Responsibility fee calculated?

The fee is determined under tax code § 4980H(a), and imposed based on the number of individuals employed by the employer as full-time employees during the month.


When does the Employer Shared Responsibility fee take effect?

The employer shared responsibility provisions took full effect starting in 2016.

Many of the employer responsibility provisions took effect in 2015, but the IRS provided transitional relief for that year. The fee did not apply for many employers with at least 50 but fewer than 100 full-time employees. Employers that were subject to the employer responsibility provisions in 2015 had to meet lower requirements: As one of the conditions for avoiding an assessable payment, they had to offer coverage to at least 70 percent of full-time employees (rather than 95 percent, the 2016 requirement).

What can my organization do to avoid the Employer Shared Responsibility fee?

Follow these best practices:

· Track and measure all employees to determine health care eligibility under the ACA.

· Determine when and how to make compliant offers of coverage to identified employees.

· Complete and file forms 1094 and 1095 per IRS regulations using your historical data.

· Get help from your tax, legal, and benefits advisors on overall strategy.

· Get help from a consultant or TPA to consolidate and report on your data to the IRS.


Author Mask Christopher Tamanini, JD, MBA, SPHR
The Author

Chris has 17 years of experience in human resources across the health care, insurance, and banking industries. He is a key resource for eBenefits on legal compliance issues. Areas of expertise include government reporting, decision management, and metrics.