For Employers, a Tool to Estimate ACA Shared-Responsibility Provisions


Employers dealing with the Affordable Care Act face a number of challenges, including reporting on coverage offered to employees, the prospect of higher tax penalties under the employer mandate and proper classification of workers.

Regarding workers, the ACA requires applicable large employers to meet certain criteria in health plans to avoid the employer shared-responsibility payment. To help deal with this, the Internal Revenue Service offers the Employer Shared Responsibility Provision Estimator.

The estimating tool, which is available at the IRS website, helps employers determine the number of full-time employees, including full-time equivalents; whether the business qualifies as an applicable large employer; and the potential liability for the shared-responsibility payment if the employer failed to offer coverage to full-time employees.

An applicable large employer is one that had an average of at least 50 full-time employees, including full-time equivalent employees, during the preceding year. Employees who are not full time and are working 15 hours a week count as half a full-time employee. However, ACA-covered employers only need to offer health insurance to full-time employees.

The shared-responsibility payment is imposed after employers fail to offer affordable health care to qualified employees each month that meets a minimum value. Employers can owe the payment in two situations:

--The payment under Section 4980H(a) is imposed if at least one of the full-time employees receives the premium tax credit because the employer does not offer health coverage to at least 95 percent of its full-time employees.

--The payment under Section 4980H(b) is imposed if at least 95 percent of full-time employees have health coverage but at least one full-time employee receives the premium tax credit because the offer of coverage does not provide minimum value or is unaffordable to the employee.

The calculation for the Section 4980H(a) payment is different from the calculation for the Section 4980H(b) payment and employers liable for the employer shared-responsibility payment are only liable for one of the payments, the IRS says.

The estimator, which the IRS provides as a guide to understanding the shared-responsibility provision, requires employers to measure employees’ hours of service to determine if they are full-time employees.  Employers also can use the estimator to understand the two methods that can be used to determine full-time status.  

The IRS wants employers to have certain information about themselves and their employees before using the estimator, such as whether they are an educational organization, whether any employees are seasonal and the starting date for new employees and employees starting work after an absence.

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