The Affordable Care Act mandate specifies that employers must offer a majority of their employees affordable health coverage. For tax year 2016 and forward, you’ll need to calculate whether 95% of your full-time employees (and their dependents) were covered. If 95% of your eligible employees were not offered with affordable healthcare coverage, you may be subject to fines.
The IRS calculates the fines using the following method:
For any calendar month in the previous year, an applicable large employer with at least 50 full-time employees (including full-time equivalents) does not offer coverage to at least 95% of its full-time employees (and their dependents), it owes an Employer Shared Responsibility payment equal to the number of full-time employees the employer employed for the month (minus 30) multiplied by 1/12 of $2,000. This is provided that at least one full-time employee receives a premium tax credit for that month.
For an employer with at least 50 full-time employees (including full-time equivalents) that offers coverage to at least 95% of its full-time employees, but has one or more full-time employees who receive a premium tax credit, the payment is computed separately for each month. The amount of the payment for the month equals the number of full-time employees who receive a premium tax credit for that month multiplied by 1/12 of $3,000. The amount of the payment for any calendar month is capped at the number of the employer’s full-time employees for the month (minus up to 30) multiplied by 1/12 of $2,000.
By determining whether you offered affordable health coverage to 95% of your employees on a month by month basis, you’ll be able to accurately complete your ACA filing and be prepared for any fines that result from non-compliance.