Basically the penalty for not providing Health Insurance – Minimum Essential Coverage (MEC) is $2,000/employee. The penalty if coverage is not affordable 9.5% or does not provide minimum value – Bronze Plan is $3k/employee. The details get quite confusing… so follow the links in the right hand column and below to see how it would apply to your group, situation, what you are offering and if any of your employees apply to Covered CA for subsidies.
50-99 Employer Penalties 2015-2016
100+ Employer Penalties 2015-2016 §4980 H (a) (b)
An Employer only have to offer affordable coverage – which is less than 9.5% of income for employee coverage and 60% AV Bronze Plan – Learn More⇒ CNBC News 3.11.2015.
How Coverage You Offer (or Don’t Offer)
May Mean an Employer Shared Responsibility Payment for Your Organization
Under the Affordable Care Act, certain employers, based on workforce size – called applicable large employers – are subject to the employer shared responsibility provisions. The vast majority of employers fall below the workforce size threshold and, therefore, are not subject to the employer shared responsibility provisions.
If you are an employer that is subject to the employer shared responsibility provisions, you may choose either to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, or to potentially owe an employer shared responsibility payment to the IRS. Many employers already offer coverage that is sufficient to avoid owing a payment.
If your organization is an applicable large employer, and you choose not to offer affordable minimum essential coverage that provides minimum value to your full-time employees and their dependents, you may be subject to one of two potential employer shared responsibility payments.
More specifically, you may need to make an employer shared responsibility payment to the IRS if you are an applicable large employer and either of these circumstances applies for 2015:
- You offered minimum essential 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 [Covered CA] and received the premium tax credit.
- You offered minimum essential coverage to at least 70 percent of your full-time employees and their dependents, but at least one full-time employee enrolled in coverage through the Health Insurance Marketplace [Covered CA] and received the premium tax credit. A full-time employee could receive the premium tax credit because the coverage that was offered was not affordable, did not provide minimum value, or was not offered to the full-time employee.
For both of these circumstances, the 70 percent threshold changes to 95 percent after 2015.
The terms “affordable” and “minimum value” have specific meanings under the Affordable Care Act that are explained in questions 19 and 20 on the employer shared responsibility provision questions and answers page on IRS.gov/aca. Transition relief for offers of coverage to dependents for 2015 is described in question 33 on the same page.
For more information on the information reporting responsibilities that apply to applicable large employers see our Questions and Answers on Reporting of Offers of Health Insurance Coverage by Employers.
Thank you for subscribing to IRS Tax Tips, an IRS e-mail service. For more information on federal taxes please visit IRS.gov.
Resources & Links
IRS FAQ’s Shared Responsibility Penalties
NAHU Analysis of Tax Penalties newsmanager.commpartners.com
What’s the minimum – MEC Minimum Essential Coverage Balch & Bingham Esq
Related Pages in Employer Mandate for Health Insurance Section
- §4980H – Shared responsibility for employers regarding Health Insurance
- 6056 Reporting
- Employer Group or Individual Coverage?
- Employer Mandate – Historical Info
- Employer Mandate DELAYED till 2016…
- Mandate – Employee Definition?
- W – 2 Reporting