What Applicable Large Employers Need to Know About the Employer Shared Responsibility Payment

IRS Health Care Tax Tip 2016-53, May 25, 2016

Under the Affordable Care Act, applicable large employers – those with 50 or more full-time employees, including full-time equivalent employees – must either offer minimum essential coverage or potentially make an employer shared responsibility payment.

You may have to make a payment later this year, if – during tax year 2015 – you:

• Offered coverage to fewer than 70 percent of your full-time employees and their dependents and at least one full-time employee enrolled in coverage through the Health Insurance Marketplace receives a premium tax credit when they file their tax return
• Offered coverage to at least 70 percent of your full-time employees and their dependents, but at least one full-time employee receives a premium tax credit because at least one of the following applies:
  • coverage offered was not affordable
  • coverage did not provide minimum value
  • the full-time employee was not offered coverage

Remember that the vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions. However, if you are an ALE and want to reduce the likelihood you’ll owe a payment for tax year 2016, you can – for each of the remaining months in 2016 – offer at least 95 percent of your full-time employees and their dependents coverage that meets the minimum value requirements and is affordable.

For more information, visit the Employer Shared Responsibility Provisions Questions and Answers page on IRS.gov/aca.