Employer shared responsibility decides whether larger employers must offer coverage.
Section 4980H of the tax code requires larger employers to offer qualifying coverage to full-time employees or face possible penalties.
The Basics for Employers.
A plain-English summary. This is general information, not legal advice, and the rules change, so check the current text.
Who Is Covered
Applicable large employers, generally those averaging 50 or more full-time equivalent employees, are subject to the rule.
What Must Be Offered
Coverage must be offered to full-time employees working 30 or more hours a week and their dependents, and it must be affordable and provide minimum value.
Penalties
Penalties can apply when coverage is not offered or is not affordable, and the dollar amounts adjust each year.
How it plays out.
Section 4980H is the employer mandate. An applicable large employer, generally one with an average of 50 or more full-time employees including full-time equivalents, can owe a payment if it does not offer coverage to enough full-time employees, or if the coverage it offers is not affordable or does not provide minimum value.
There are two penalties. The first applies when the employer fails to offer coverage to at least 95 percent of full-time employees and at least one of them gets a premium tax credit. The second applies when coverage is offered but is unaffordable or lacks minimum value for a particular employee who receives a credit.
Employers often use a look-back measurement method for variable-hour employees, with a measurement period and a stability period. It reduces guesswork but needs consistent tracking.
Where This Shows Up in Your Plan.
ERISA, ACA Reporting and Form 5500 Support
How we help with the filings, notices and plan documents.
Employer Benefits Guides: Eligibility, Plan Design, Life Events and Rules
Eligibility, plan design and life-event rules in one place.
Staying out of penalty.
Count Full-Time Staff
Track full-time employees by month.
Offer Coverage Broadly
Check that offers reach enough full-time employees.
Test Affordability
Run affordability each year using a safe harbor.
Track Variable-Hour Staff
Use a consistent measurement method.
Mistakes to avoid.
Counting Once a Year
Status is measured by month.
Ignoring Part-Time Creep
Drifting hours can make employees full-time.
Skipping Affordability
The cost of the lowest-cost plan matters.
Other Rules Employers Work With.
No Surprises Act
Public Law 116-260, Division BB
Mental Health Parity
29 U.S.C. 1185a
Newborns’ and Mothers’ Health Protection Act
29 U.S.C. 1185
Laws and Rules Referenced
Employer Shared Responsibility (26 U.S.C. 4980H) — The statute or rule text from its official or public source.
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