IRS spotlights employer shared responsibility payments

The IRS has updated its webpage with a fact sheet containing information about the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA). An applicable large employer (ALE) may be subject to an employer shared responsibility payment if it fails to offer minimum essential coverage or if it fails to offer affordable minimum essential coverage that provides minimum value. However, an ALE may be subject to only one, not both, of the two potential employer shared responsibility payments depending on its decisions about offering minimum essential coverage to its fulltime employees (and their dependents).

The fact sheet describes which payment applies when employers fail to offer minimum essential coverage and how the payment is calculated. A provision of transition relief is available for employers who offer coverage to at least 70 percent of their full-time employees, as well as those who did not previously offer coverage to dependents but took steps during either 2014 or 2015 to extend coverage to dependents.

In addition, the fact sheet also describes the second type of payment, which applies when an employer fails to offer affordable minimum essential coverage that provides minimum value. Information on how the payment is calculated under this scenario has also been provided; this payment calculation is different from the calculation of the payment under the option discussed previously. The IRS has also provided three examples illustrating which payment applies and the calculations required.

Further, the fact sheet defines the meaning of the term “offer of coverage” and describes how the assessment and collection of the employer shared responsibility payment will be handled by the IRS. Finally, any employer shared responsibility payment is not deductible for federal income tax purposes.


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