Affordable Care Act

The Basic Facts

Penalties

There are two kind of penalties imposed on employers subject to the Employer Mandate who chose to not “play.” And therefore, they must “pay.”

No offer of Health Insurance Coverage:
The annual penalty for an applicable large employer for failing to offer coverage to at least 95% of full-time employees in 2016 (70% for 2015) is equal to the number of all full-time employees (minus 30 full-time employees in 2016 (80 full-time employees for 2015)) multiplied by $2,000, if at least one full-time employee receives a federal premium subsidy to help pay for coverage purchased for himself or herself through an exchange.

Health Insurance Coverage offered, but it is not good:
The annual penalty for an applicable large employer that fails to offer coverage that is “affordable” and that provides “minimum value” is only equal to the number of full-time employees who receive a federal premium subsidy, multiplied by $3,000.

The $3,000 penalty total that applies based on each full-time employee who receives a federal premium subsidy cannot exceed the $2,000 penalty total. In other words, the payment for an employer that offers coverage can never exceed the payment that employer would owe if it did not offer any coverage at all.

The penalties are assessed per EIN, following the previous tax year filings.

But a Full-time employee doesn’t qualify for subsidies — and therefore cannot trigger a penalty against the employer — if he/she is actually enrolled in MEC through the employer that is adequate and affordable.

Remember, if the employer offers the MEC, but the Full-time employees declines, the employer is not subject to any penalty.

You can read in detail about the penalties here.