VOL. XIX, ISSUE 2
More Answers for Employer Shared
Responsibility Requirements
APRIL 2014
Letter from Karen Knippen
We have all been struggling with understanding
The release of the final rules for the employer shared
responsibility provisions of the Patient Protection and
Affordable Care Act, commonly given the shorthand
acronym of ACA, ranks among some of the more
confusing regulations released for ACA compliance
yet. To assist employers, the IRS developed a set of
questions and answers for employers.
This issue of Legislative Review provides a review of
the IRS release of Questions and Answers on Employer
Shared Responsibility Provisions Under the Affordable
Care Act.
The questions and answers are grouped into nine (9)
broad categories. Employers and producers who wish to
review the document in detail can find the document at
http://www.irs.gov/uac/Newsroom/Questions-andAnswers-on-Employer-Shared-Responsibility-ProvisionsUnder-the-Affordable-Care-Act.
Basics of the Employer Shared
Responsibility Provisions
This section of the document provides a brief overview
of the employer responsibility requirements which are
the provisions that detail the penalties that employers
may face under the ACA. Employers with 50 or more
full-time equivalent (FTE) employees may be subject to
compliance with these provisions starting in 2015.
the provisions of the ACA and all of the 20,000 and
more pages of guidance. This is really complicated
stuff. And, for many of your clients, making these
assessments of whether an employer is an ALE and
when the penalties may apply may be like learning a
new language.
It may be worthwhile saving the actual IRS question
and answer document so that you can have it ready
at a moment’s notice.
Sincerely yours,
Karen Knippen, RHU, REBC, CLTC
EUCLID MANAGERS® has been serving the independent agent since
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proudly represent UnitedHealthcare, Delta Dental of Illinois,
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continued on page 2
The information contained in this publication is intended for the general information of our clients. It should not be construed as legal
advice or legal opinion regarding any specific or factual situation.
In general, employers with 50 or more FTEs are required
to provide affordable coverage that provides a
minimum level of coverage to full-time employees
and dependents. Employers may be subject to a penalty
if at least one of their full-time employees receives a
premium tax credit (subsidy) for purchasing individual
coverage on the exchange.
Which Employers Are Subject to
the Employer Shared Responsibility
Provisions?
This section of the document provides details regarding
counting employees, addressing seasonal workers and
others who may have other coverage. This section is
critical because an employer must first determine
whether or not it meets the employer responsibility
provisions to begin to address other provisions of the
law. While the idea of counting employees does not
seem like it should be difficult; this section illustrates
how complicated counting employees can be.
Concepts addressed in this section include how new
employers should count employees, the combining of
commonly owned employee counts to determine the
law’s applicability and whether government entities
must comply with these provisions.
One of the often misunderstood items that is clarified
in this section is the fact that employees covered by
Medicare, Medicaid or a spouse’s employer must be
included when an employer is counting employees to
determine if the employer is an “applicable large
employer” or ALE. These employees are counted
towards making this determination.
-2 legislative review
Identification of Full-Time Employees
The final regulations define a full-time employee as one
who provides 130 hours of service in a calendar month
which is treated as the monthly equivalent of at least
30 hours per week. There are two (2) measurement
methods that an employer can use to determine
whether someone has sufficient hours of service to
be considered full-time. These are the monthly
measurement period and the look-back measurement
period. The look-back measurement period is not used
to determine whether an employer is an ALE but only
for computing any liability for the employer mandate.
An hour of service means “each hour for which
an employee is paid, entitled to payment, for the
performance of duties for the employer, and each
hour for which an employee is paid, or entitled to
payment for a period of time during which no duties
are performed due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty,
military duty or leave of absence.”
The document refers to special rules for on call hours,
airline employees and others.
Liability for the Employer Shared
Responsibility Payment
This section reviews the penalties and requirements to
avoid them. Employers may be subject to the A penalty
if the employer does not offer coverage to a majority
of employees or the B penalty if coverage does not
meet minimum value and affordability requirements.
www.euclidmanagers.com
Answers provide details on calculating minimum value
and affordability. Employers may meet the affordability
safe harbor via any of three (3) affordability safe
harbors any of which can be assessed with information
that an employer has readily available such as W-2
wages and rate of pay.
opportunity to challenge this assessment before a
demand for payment is made. Penalty assessments will
occur after the due date for employees to file individual
tax returns, so the penalties will always reflect the prior
year’s enrollments.
The answers also confirm that for penalty purposes, a
spouse is not considered to be a dependent. Therefore,
an employer is not subject to a penalty because an
employee’s spouse (who is not otherwise eligible for
coverage because the employer does not offer them
coverage) purchases coverage on the exchange and
receives a subsidy. Answer 23 states unequivocally that
“an employer will not be liable for an Employer Shared
Responsibility payment unless a full-time employee
receives a premium tax credit.”
Transition Relief
Questions 29 through 39 address transition relief.
The transition relief provisions are very complex and
require a step-by-step assessment reflecting each
employer’s facts and circumstances. One cannot
assume that any given employer will qualify for
transition relief nor is it correct that all employers
with 50 to 100 FTEs qualifies for transition relief.
Calculation of the Employer Shared
Responsibility Payment
Many employers have taken steps – or have
contemplated taking steps – that may make then
unable to qualify for transition relief. Among these
may have been reductions of employee hours of service
to avoid ACA compliance requirements.
This section addresses the calculation of the penalty
for employers that don’t offer coverage to 95% of
full-time employees. Note: transition relief for 2015
may reduce this percentage to 70%.
Basics for Small Employers
Employers should be aware that the penalties will be
inflation adjusted beginning in years after 2014.
Making an Employer Shared
Responsibility Payment
One of the transition rules that applies in 2015 that
is particularly relevant to small employers close to
50 FTEs is that employers may use any consecutive
six-month period during 2014 to determine whether
they exceed the 50 FTE threshold.
Additional Information
Employers will be notified by the IRS that an employee
has received a premium tax credit that may result in
a penalty to the employer. Employers will have the
The last four (4) questions speak to the subsidy for
individuals and where to get more information.
www.euclidmanagers.com
legislative review 3-
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Graefen at (630) 238-2915 or fax your request to (630) 773-8790. Outside Chicagoland: (800) 345-7868, Fax (877) 444-2250. © Permission to quote with credit to source.
More Answers for Employer Shared
Responsibility Requirements
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