The Employer Mandate Fee / Employer Shared Responsibility Payment
Posted on 10.06.2014
The employer mandate fee is officially referred to as a “shared responsibility payment,” as the fee will help fund marketplace subsidies and fund other aspects of the Affordable Care Act.
The annual employer mandate fee (officially called an Employer Shared Responsibility Payment) is a per employee fee for employers with over 50 full-time equivalent employees who don’t offer health coverage to full-time employees. Smaller employers (with less than 50 full-time equivalent employees) won’t pay a fine for not providing health insurance.
Here are some specific information and references regarding this Mandate:
• The employer mandate is based on full-time equivalent employees (FTEs), not just full-time employees.
• The fee is based on whether or not you offer affordable health insurance that provides minimum value (explained below) to your employees.
• In 2015 employers with more than 100 FTEs will need to cover 70% of their full-time employees. By 2016 employers with more than 50 FTEs will need to provide coverage to “substantially all” (95%) their full-time employees.
• The annual fee is $2,000 per employee if insurance isn’t offered (the first 30 full-time employees are exempt).
• If at least one full-time employee receives a premium tax credit because coverage is either unaffordable or does not cover 60 percent of total costs, the employer must pay the lesser of $3,000 for each of those employees receiving a credit or $750 for each of their full-time employees total.
• The fee is a per month fee due annually on employer federal tax returns starting in 2015 for small businesses with 100 or more full-time equivalent employees (2016 for those with 50-99). So the per month fee is 1/12 of the $2,000 or $3,000 per employee.
• Unlike employer contributions to employee premiums, the Employer Shared Responsibility Payment is not tax deductible.
• Transition relief is available to small businesses and large businesses transitioning into compliance with the new mandate. Please see the official IRS rules regarding transition relief here .
• The Internal Revenue Service has more information about the Employer Shared Responsibility Payment. Click here to view.