Cross References
- IRC §4980H
- IRC §36B
- U.S. Treasury Blog by Mark J. Mazur, July 2, 2013

Under the Health Care Reform Act, a large employer with at least 50 full-time employees is required to offer minimum essential health coverage to its full-time employees beginning January 1, 2014 (IRC §4980H). If an employee is not offered minimum essential health coverage by the employer, the employee may be eligible for the premium assistance credit (IRC §36B). The penalty for failure by an employer to offer minimum essential health coverage is one-twelfth of $3,000 per full-time employee, per month in which the employee receives a premium tax credit or cost-sharing subsidy. The maximum penalty per employer is capped at an amount equal to the number of full-time employees during the month (regardless of how many employees are receiving a premium tax credit or cost-sharing subsidy) in excess of 30, multiplied by one-twelfth of $2,000.

Example: ABC Corporation has 100 full-time employees, 20 of whom receive a premium tax credit for all 12 months during the year. ABC Corporation owes a total penalty of $60,000 [20 x (1/12 x $3,000) x 12]. The maximum penalty is capped at $140,000 [(1/12 x $2,000) x (100 – 30) x 12]. Since the calculated penalty of $60,000 for the year is less than the maximum penalty cap, ABC Corporation pays $60,000 for failing to offer 20 of its employees affordable minimum essential health coverage.

Author's Comment: In the above example, ABC Corporation may have failed to offer all 100 employees affordable minimum essential health coverage. However, if only 20 of those 100 employees apply for the premium assistance credit or costsharing subsidy through their state exchange, the penalty is based only on those employees who apply. Thus, enforcement of the rules is dependent on insurance reporting requirements under IRC section 6055 and employer reporting requirements under IRC section 6056 so that the government knows which employees have insurance and which employees do not.

Delay in rule. The U.S. Treasury has announced that it is delaying the January 1, 2014 beginning date requirement for employers until January 1, 2015. Over the past several months, the Obama Administration has been engaging in a dialogue with businesses about the new employer and insurer reporting requirements. Many of these businesses already provide health coverage for their employees. The Administration has heard concerns about the complexity of the requirements and the need for more time to implement them effectively.

The additional year before the employer mandate takes affect and insurance reporting requirements begin is designed to meet two goals. First, it will allow the Treasury time to consider ways to simplify the new reporting requirements consistent with the law. Second, it will provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.

The delay in the implementation of the employer mandate does not affect an employee’s access to the premium tax credit if the employee otherwise qualifies for the credit.