Employer Mandate

<div class="Section1">Two or more employers who are controlled by the same owner or are otherwise related are considered to be a single employer if those employers are treated as a single employer under IRC Section 414.<a href="#_ftn1" name="_ftnref1">¹</a> IRC Section 414 treats two or more employers as one if they are: (1) part of a controlled group of corporations, (2) trades or businesses that are under common control, (3) affiliated service groups or (4) related through other arrangements generally having the same effect as in groups (1)-(3).<a href="#_ftn2" name="_ftnref2">²</a></div><br /> <div class="Section1"><br /> <br /> These employers are combined in determining whether they collectively employ 50 or more full-time employees for purposes of applicable large employer status. If the combined total number of full-time employees exceeds 50 full-time employees (including equivalents), each employer is subject to the shared responsibility provisions even if no single employer crosses the threshold.<br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 4980H(c)(2)(C)(i).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  IRC §§ 414(b), (c), (m), (o).<br /> <br /> </div>

<div class="Section1">If the employer offers health coverage to fewer than 95 percent of its full-time employees, it may be subject to the shared responsibility provisions and owe a payment if any full-time employee purchased insurance through the exchanges and received a premium tax credit.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="Section1"><br /> <br /> To calculate this payment, the employer multiplies the number of full-time employees it employed for the year (minus up to 30, and the number of full-time employees who were offered coverage) by $2,000.<a href="#_ftn2" name="_ftnref2">²</a> For purposes of this calculation, a full-time employee does <em>not</em> include a full-time equivalent employee.<br /> <br /> If the employer offers coverage for some months, but not for others, it must calculate its shared responsibility payment separately for the months in which coverage was not offered. The payment is equal to the number of full-time employees employed for the month (minus up to 30, and the number of full-time employees who were offered coverage) multiplied by 1/12 of $2,000. If the employer does not offer coverage to a full-time employee on any day of a calendar month, that employee is treated as not having been offered coverage for the entire month.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 4980H(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  Treas. Reg. § 54.4980H-5(a).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.  Treas. Reg. § 54.4980H-5(c).<br /> <br /> </div>

<div class="Section1">Yes, an applicable large employer remains subject to the shared responsibility provisions even if all of its employees obtain coverage from other sources. However, the employer will only be required to pay the shared responsibility penalty if one or more of its employees receives a premium tax credit for purchasing individual health coverage. The shared responsibility penalty is calculated based on the number of full-time employees for the month in which an employee receives the premium tax credit.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC 4980H(a)(2).<br /> <br /> </div>

<div class="Section1">Yes, a self-employed owner of a small business is entitled to claim the self-employment health insurance tax deduction for health coverage purchased on the health insurance marketplace for the taxpayer and his or her family. This is the case if the taxpayer purchases the health insurance through the individual marketplace or through the small business (SHOP) marketplace. However, if the taxpayer claims the premium tax credit, the amount of the premium tax credit received cannot be deducted.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, available at: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act (last accessed September 28, 2024).<br /> <br /> </div>

<div class="Section1">No. The Department of Labor has released guidance providing that an employer who offers high-risk employees a choice between enrollment in a group health plan or cash violates the nondiscrimination requirements of the Affordable Care Act.<a href="#_ftn1" name="_ftnref1">¹</a> This is the case regardless of whether the cash payment is pre-tax or after-tax and regardless of whether the employee obtains individual health coverage from another source.<a href="#_ftn2" name="_ftnref2">²</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 9815.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  DOL FAQ About the Affordable Care Act Implementation (Part XXII), available at: <a href="https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xxii.pdf">https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/aca-part-xxii.pdf</a> (last accessed September 28, 2024).<br /> <br /> </div>

<div class="Section1">IRS guidance indicates that an employer who owes a shared responsibility penalty will not be required to include payment when it files its tax return for the year. Instead, the IRS will send a notice and demand for payment that includes payment instructions for the employer to follow.<a href="#_ftn1" name="_ftnref1">¹</a></div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, available at: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act (last accessed September 28, 2024).<br /> <br /> </div>

<div class="Section1"><em>Editor’s Note:</em> The SECURE Act repealed the Cadillac tax entirely late in 2019. The tax, discussed below, never went into effect.</div><br /> <div class="Section1"><br /> <br /> Preliminary IRS guidance indicated that many types of employer-provided health benefits (in addition to traditional health insurance premiums) would be counted in determining whether the employer would be subject to the ACA “Cadillac tax” on high cost health coverage. An employer was to become liable if it offered employer or salary reduction contributions to a health savings account (HSA) or health flexible spending account (FSA) that it administers.<br /> <br /> Pre-tax contributions to HSAs were likely to be included in determining whether an employee’s health coverage was subject to the Cadillac tax, but an employee’s after-tax contributions were not included in the calculation.<br /> <br /> The cost of health FSAs, Archer MSAs, HRAs, retiree coverage and multi-employer plan coverage were also expected to be included when calculating whether the threshold that triggers the Cadillac tax was crossed.<a href="#_ftn1" name="_ftnref1">¹</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  Notice 2015-16.<br /> <br /> </div>

<div class="Section1">The Affordable Care Act shared responsibility rules treat two or more employers that are under common control as a single employer for purposes of determining whether that employer is an applicable large employer so that the shared responsibility penalties may apply.<a href="#_ftn1" name="_ftnref1">¹</a> As a result, all of an employee’s hours of service with each member of a group of employers that are under common control are added together in determining whether that employee is a full-time employee for purposes of applicable large employer status.</div><br /> <div class="Section1"><br /> <br /> Conversely, if the employee works for two employers who are not under common control, the employee’s hours of service with the first employer are not counted as hours of service with the second employer.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 4980(c)(2)(C)(i).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  IRS Questions &amp; Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, available at: http://www.irs.gov/Affordable-Care-Act/Employers/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act (last accessed September 28, 2024).<br /> <br /> </div>

<div class="Section1">Employer-sponsored health coverage provides “minimum value,” so that it also provides minimum essential coverage, if the plan covers at least 60 percent of the total allowed costs of benefits provided under the plan.<a href="#_ftn1" name="_ftnref1">¹</a> Beginning in 2014, an employer that offers health coverage to its employees is required to provide each employee with a Summary of Benefits and Coverage, which is a document that explains the benefits provided under the plan and must also include a statement as to whether the plan provides minimum value.</div><br /> <div class="Section1"><br /> <br /> The Department of Health and Human Services and the IRS have provided guidance stating that a health plan that does not cover substantial hospital and physician services will not provide minimum value, and cannot satisfy an applicable large employer’s obligation to provide health coverage to avoid the shared responsibility penalties.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> If an employee enrolls in a plan that does not provide minimum value, that employee is ineligible to claim the premium assistance tax credit even though the plan fails to provide the required coverage.<br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 36B(c)(2)(C)(ii).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  Notice 2014-69, 2014-48 IRB 903.<br /> <br /> </div>

<div class="Section1">No. If an applicable large employer offers coverage that is affordable and provides minimum value, the employer will not be subject to the shared responsibility provisions if some of its employees, or their spouses or dependents, obtain coverage from another source, such as through the insurance marketplace or through Medicare or Medicaid.</div><br /> <div class="Section1"><br /> <br /> The employer will not be subject to the shared responsibility payment unless one of its employees receives a premium tax credit.<a href="#_ftn1" name="_ftnref1">¹</a> If the employer offers coverage that is both affordable and provides minimum value to employees and their dependents, neither the employees nor their dependents will be eligible for the premium tax credit if they elect to purchase insurance through the exchanges. Employees (or dependents) who are eligible for Medicare or Medicaid are not eligible for a premium tax credit.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> </div><br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%" /><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.  IRC § 4980H(a).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.  <em><em>See</em></em> Preamble to the Final Regulations, TD 9655.<br /> <br /> </div>