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Blog By: Beth Ede, SPHR
 

Employer Shared Responsibility Provision (Play or Pay)

Understanding the Requirement – Part III: The Assessable Payment (Penalty)

 

It’s important to understand that the health care reform law does not impose a requirement on employers to offer health coverage.  However, starting in 2014, applicable large employers (see Part I posted March 11, 2013) will be subject to Employer Shared Responsibility – the Play or Pay provisions under the Affordable Care Act.

 

Organizations will be subject to an assessable payment (penalty) if either of the following occurs:

 

(1)     The employer fails to offer to its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan and any full-time employee is certified to the employer as having received an applicable premium tax credit or cost-sharing reduction by enrolling in coverage in the Exchange

 

OR

(2)     The employer offers its full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan but the coverage fails to meet affordability or minimum value requirements, and one or more full-time employees is certified to the employer as having received an applicable premium tax credit or cost-sharing reduction by enrolling in coverage in the Exchange

 

It’s important to note that current guidance applies to the offer of coverage to full-time employees (those working on average 30 hours per week or 130 hours per month) effective in 2014 and to their dependents beginning in 2015.  “Dependent” in this situation is defined as an employee’s child who is under 26 years of age – it does not include the employee’s spouse.

 

The assessable payment (penalty) will be calculated as follows:

 

(1)     If an employer chooses not to offer minimum essential coverage, the monthly

penalty will equal the number of full-time employees for the month (minus up to 30) multiplied by 1/12th of $2,000

 

OR

 

 

(2)     If an employer chooses to offer minimum essential coverage but it does not meet affordability  or minimum value requirements, the monthly penalty will be the lesser of: 

 

a.        the number of full-time employees for the month (minus up to 30) multiplied by 1/12th of $2,000

 

OR

b.       the number of full-time employees who receive an applicable premium tax credit or cost-sharing reduction on the Exchange multiplied by 1/12th of $3,000

 

 

These amounts are fixed for 2014 but will be adjusted for inflation in the years ahead.

 

If WA can be of assistance to you in determining the factors and analyzing the information, please feel free to contact us 

 





Posted 11:47 AM  View Comments

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