Posted by James Financial Services Inc

What Are The Penalties For Shared Employer Responsibility Under The Patient Protection & Affordable Care Act (PPACA)?

What Are The Penalties For Shared Employer Responsibility Under The Patient Protection & Affordable Care Act (PPACA)?

The employer shared responsibility requirements under the Patient Protection and Accessibility of Care Act (PPACA or ACA) include the employer's mandate - paid or play- and the obligation to provide minimal coverage that is of minimum value and cost-effective. Both provisions have sanction consequences for employers with at least 50 full-time equivalent employees (large employers).


The employer mandates, pay or play.

According to the PPACA, the federal government, state governments, insurers, employers, and individuals have a shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. The law does not compel employers to provide health insurance, but it does impose penalties on large employers for not doing so.

Depending on the mandate, a large employer that does not provide health insurance coverage to almost all (95%) of its full-time employees and their dependents may be subject to a tax penalty (the so-called play or play provision).


Penalty

A fine of $ 2,700 (until 2021) is imposed on each full-time employee minus the first 30 if the employer fails to provide minimum essential coverage for 95% of its full-time employees and their dependents, and all full-time employees are covered instead.

For example, if an employer with 150 employees does not provide health insurance for its full-time employees and their dependents, and at least one full-time employee purchases tax-subsidized health insurance in the stock market, the employer's penalty in 2021 will be $324,000 (150 - 30 × $ 2,700).


Providing minimal and affordable coverage

If an employee's premium share for employer-provided coverage cost the employee more than 9.83% of that employee's annual family income, the coverage would not be considered appropriate. Since employers generally do not know their employees' family income, they can take advantage of one or more of the three secure ports of access defined in the final regulation, which is based on the information available to the employer, such as the W-2 Form salary or employee's pay rate.

A plan provides a minimum amount if it covers at least 60% of the total eligible cost of the benefits you must incur in the plan.


Penalty

An employer will be subject to a penalty if employer-sponsored coverage is inaccessible or does not provide a minimum amount. One or more full-time employees receive subsidized coverage through an exchange. An employee may be eligible for subsidized coverage through an exchange if their family's income is below 400% of the federal poverty line. The employer's plan is inaccessible or has no minimum amount. The monthly fine is $4,060 (in 2021) divided by 12 for each full-time employee who receives subsidized coverage during a monthly shift. However, the fine will not exceed the monthly fine imposed if the employer did not provide any coverage ($2,700 divided by 12, multiplied by the number of full-time employees for the corresponding month, not including the first 30 employees). Only full-time employees, and not full-time equivalents, are calculated for the penalty calculation.

Additional PPACA requirements, including penalties for non-compliance:

  • High-value plans: The Cadillac tax scheduled for January 2022, included in the ACA but postponed several times in its implementation, was completely repealed in December 2019, preventing the tax from taking effect.

  • IRS information return: The PPACA imposes significant reporting responsibilities based on the employer's health plan and the number of employees.


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