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.

Employer Shared Responsibility Penalties

The IRS calculates the Employer Shared Responsibility 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 employer shared responsibility fines that result from non-compliance.

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Hopefully this article has helped you further understand Employer Shared Responsibility and the associated penalties.

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BoomTax, The Boom Post, and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors prior to engaging in any transaction.