Employer Shared Responsibility: Why Failure To Act Could Mean Risky Business
Even with a one-year delay, there are steps employers should take now to prepare for employer shared responsibility (ESR) and minimize the risk of potential penalties later. Knowing and understanding the key components of ESR that could impact your business – minimum essential coverage and affordability, who qualifies as an applicable large employer, the ESR definitions of full-time, part-time, and full-time equivalent employees, and the potential penalties – is critical.
Employer Shared Responsibility
On February 10, 2014, the U.S. Department of the Treasury released final guidance which included transition relief in enforcement of the Employer Shared Responsibility (ESR) provisions of the Affordable Care Act for employers with 50 or more full-time (including full-time equivalent) employees. This transition relief for applicable large employers has a number of areas of impact.
Companies with 50-99 full-time employees
- One-year delay in enforcement of the provisions until 2016.
- Must meet certain conditions outlined in the regulations to qualify for the transition relief and must certify in ESR reporting that they have met these conditions. If not, they may still be liable for potential penalties if one of their non-covered employees receives a premium subsidy from a Health Insurance Marketplace or if the coverage offered is not affordable or does not provide minimum value.
Companies with 100 or more full-time employees
- Still subject to the ESR provisions in 2015.
- Those who offer minimum essential coverage (MEC) may avoid a potential penalty if they offer coverage to at least 70 percent of their full-time employees and their dependents (instead of the previous standard of 95 percent). This requirement returns to 95 percent (or all but five full-time employees, whichever is less) in 2016 and beyond.
- This relief can also extend into 2016 for those who have non-calendar year plans in effect prior to February 10, 2014.
- Companies may still be liable for potential penalties if one of their non-covered employees receives a premium subsidy from a Health Insurance Marketplace or if the coverage offered is not affordable or does not provide minimum value.
- The penalty applied when an employer does not offer health coverage to substantially all (70% for 2015) full-time employees and their dependents and at least one full-time employee receives a premium tax credit for coverage is adjusted – the first 80 full-time employees are subtracted before calculating from this penalty in 2015. The reduction cap returns to the first 30 full-time employees for all applicable large employers in 2016.
- The total number of employees includes the total within a Controlled or Affiliated Service Group.
Although the provision enforcement is delayed for some employers, it is imperative for employers to act now, or they may find themselves facing unavoidable penalties.
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