By Jake Hutchinson
Beginning in 2015, large employers are required to provide affordable minimum essential health insurance coverage to their employees. For 2015, a large employer is defined as having a minimum of 100 full-time (including full-time equivalent or FTE) employees. For 2016, the requirement drops to employers with 50 FTEs. An FTE is defined as an employee who works 30 or more hours a week for each month or 130 hours a month. Insurance coverage must be offered to the FTE employees. Seasonal employers are provided an exception to the rule if their full-time seasonal employees work less than 120 days.
Employers who are subject to requirements of the Employer Mandate and do not offer health insurance, or offer health insurance and a full-time employee receives a subsidy through an exchange, are subject to a non-compliance penalty. The penalty is treated as a nondeductible expense for income tax purposes. Coverage must be offered to the employee and his/her children but not for a spouse. There is a transition period in place for all employers. You can read more about the penalty and compliance on the IRS website on their Employer Mandate FAQ page.
Employers are not required to pay 100% of the premiums. The cost may be shared by the employee as long as the employee’s responsibility is affordable. In order to be affordable, the employee’s portion has to be less than 9.5% of the employee’s household income. Household income is modified adjusted gross income plus the modified adjusted gross income of each individual in the taxpayer’s household which the taxpayer claims as a dependent.
Please remember that the employer mandate timeline and detailed rules have changed over time, and will most likely continue to be refined. This article provides a basic summary of the new employer mandate. For more detailed information please contact us.