Employer Mandate: Understanding Penalties for Not Offering Health Insurance to Employees
If you are an employer with more than 50 full-time equivalent employees, you may be subject to the employer mandate under the Affordable Care Act (ACA). The employer mandate requires companies to offer affordable health insurance to their employees or face penalties.
The purpose of this blog post is to provide information about the employer mandate, and the penalties that companies can face if they fail to comply with the law.
What is the Employer Mandate?
The employer mandate, also known as the "shared responsibility" provision, requires employers with 50 or more full-time equivalent employees to offer affordable health insurance to their employees. Under the ACA, "affordable" means that the employee's share of the premium cannot exceed 9.5% of their household income.
If an employer fails to offer affordable health insurance to its employees, they may face penalties.
Penalties for Non-Compliance
The penalties for non-compliance with the employer mandate can be significant. Employers may face one of two types of penalties: the A Penalty or the B Penalty.
The A Penalty is also known as the "no coverage" penalty. If an employer does not offer any health insurance to its employees, they may face a penalty of $2,700 per full-time employee per year. However, this penalty is only assessed on the number of full-time employees minus the first 30 employees. For example, if you have 50 full-time employees and do not offer health insurance, the penalty would be $2,700 x 20 (50 - 30) = $54,000.
The B Penalty is also known as the "unaffordable coverage" penalty. If an employer offers health insurance to its employees, but the insurance is not affordable or does not meet minimum value standards, they may face a penalty of $4,060 per employee per year. This penalty is only assessed if an employee receives a premium tax credit to purchase insurance on the exchange. The B Penalty is calculated on a monthly basis, so the penalty for a given month is 1/12 of $4,060 multiplied by the number of employees receiving a premium tax credit.
It's important to note that the total penalty cannot exceed the A Penalty. So, if an employer fails to offer any health insurance and some employees receive premium tax credits on the exchange, the penalty would be $2,700 x (total number of full-time employees minus 30).
Conclusion
As an employer, it's important to understand the employer mandate and the penalties for non-compliance. Failing to offer affordable health insurance to your employees can result in significant financial penalties.
If you have more than 50 full-time equivalent employees and are unsure about your obligations under the ACA, it's recommended that you consult with a qualified benefits advisor. They can provide guidance and help you navigate the complex regulations associated with the employer mandate.
You can get in touch with a qualified benefits advisors at Proper by calling us at 972-843-5818, or by reaching out to us here: Contact Us