Failure to do so can result in the employer being liable for substantial penalties that the government refers to as shared responsibility payments.
Under the Affordable Care Act, certain employers – referred to as applicable large employers (ALEs) – are subject to the employer shared responsibility provisions, which require ALEs to offer affordable minimum essential coverage healthcare coverage that provides minimum value to full-time employees and their dependents (but not their spouses). Failure to do so can result in the employer being liable for substantial penalties that the government refers to as shared responsibility payments.
Note: Whether an employer is subject to employer shared responsibility provisions is based upon the number of equivalent full-time employees (EFTEs) employed by the employer, generally in the prior year. However, the rules that determine who is a full-time employee are complicated. Generally, anyone who works at least 30 hours per week (or 130 hours in a calendar month) is considered a full-time employee. Part-time employees are those who are not full-time employees. All the hours worked by part-time employees for the month are combined and divided by 120, and this result is added to the number of full-time employees. This sum is the number of EFTEs for the month.
Example – Equivalent Full-Time Employees - For his business, John has 45 full-time employees and 20 part-time employees. In January 2016, his part-time employees worked 960 hours. That is the equivalent of 8 (960/120) full-time employees. Thus, John employed 53 (45 + 8) EFTEs in January. In this case, John’s business is subject to the employer shared responsibility provisions, but it is only required to offer coverage to full-time employees and their dependents.
The employer shared responsibility provisions were first effective on January 1, 2015, but transition relief from certain requirements is available for 2015, including the following:
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