The Affordable Care Act (ACA) establishes under Section 4980H penalties for applicable large employers (ALEs), i.e., those with 50 or more full-time employees (FTEs) who do not:
- Offer coverage that is of minimum value to at least 95% of eligible employees and an employee obtains coverage on the healthcare marketplace, i.e., a plan that is of 60% in actuarial value; or
- Offer coverage that is affordable, cost at 9.83% of household income in 2021, to full-time employees. The affordability is based upon individual health care contributions for the lowest cost plan offering.
Many know this as the “employer shared responsibility” provision or the “pay or play” provision of the ACA.
In 2014, the 4980H penalties were set at the following and adjusted annually for a premium adjustment:
- $2,000 per eligible employee, minus the first 30, for offering coverage that is not of minimum value, i.e., offer no coverage to employees; or
- $3,000 per eligible employee for offering no coverage to employees that is of minimum value or that is not affordable.
Effective January 1 through December 31, 2021, the penalties will be adjusted as follows:
- $2,700 per eligible employee, minus the first 30, for offering coverage that is not of minimum value, i.e., offer no coverage to employees; or
- $4,060 per eligible employee for offering no coverage to employees that is of minimum value or that is not affordable.
The Legal Update provides additional information on the 2021 adjustment as well as links to the Internal Revenue Service (IRS) frequently asked questions regarding the employer shared responsibility provision.
Contact your Cowden representative for more information on this or other compliance issues.