The Employer Shared Responsibility provisions affect companies offering group health benefits. The provisions go into effect in 2015, though to some degree the provision has been pushed off until 2016 for some employers. In 2015 the provision applies to companies with at least 50 FTE’s; In 2016 that drops to companies with 50 FTE’s.
Calculating Employer Shared Responsibility fees for your company first requires that you answer a couple of questions.
- Does ESR apply to you? Will you have 100 full time employees (FTE) in 2015 or 50 FTE in 2016
- Do you provide Minimal Essential Coverage? Is your plan:
- A plan offered in the small or large group exchange in a state
- A Grandfathered plan
- A qualified government plan
- Do you offer coverage to at least 70% of your FTE
- Is the coverage you provide deemed Affordable
- Do you pay for at least 60%
- Does the coverage cost your employees less than 9.5% of their wages
If you fail to offer Minimum Essential Coverage you only pay a penalty if at least one employee purchase a plan through an exchange and receives a subsidy or tax credit.
In 2015 (100 employees or more) companies receive a credit for 80 employees. If you have 120 employees and fail to offer Minimal Essential Coverage you would pay a fee based on 40 employees (120 FTE – 80 FTE credit = 40).
The annual per employee penalty is $2,000, so on a monthly basis you would pay $6,666/67 ( [2000*40] / 12 ).
If you offer Minimal Essential Coverage but it is not affordable you would owe a fee if any employee purchased a plan through an exchange and receives a subsidy or tax credit. Employees are only eligible for federal assistance through an exchange if their employer sponsor plan costs exceed 9.5% of their wages.
The fee is based on the number of FTE who federal subsidies due to purchasing a health plan on an exchange. The annual fee is $3,000 which is paid on a monthly basis.
If you failed to provide “Affordable Coverage” and 3 of your 120 employees received a subsidy after purchasing a plan from an exchange, you would incur a fee for those three employees. Your monthly fee would be $750 ( [$3,000 * 3] / 12 ).
ESR calculations and other provisions of the PPACA continue to change, be refined and defined. Even if today you’re not subject to the provisions there are other parts of the act that may impact your benefits program and your company.
Understanding calculating Employer Shared Responsibility fees and other health care provisions is critical. If after reading the above information you still have questions, contact us at 310-414-9524, via email at email@example.com, or by completing our Fast Form below.