Patient Protection and Affordable Care Act Large Employer Mandate – Essential Payroll Series 2014

Target Date January 1, 2015. The Patient Protection and Affordable Care Act “large employer” mandate will go into effect on this date (this was originally scheduled to go into effect January 1, 2014). What does that mean to our businesses? First it is anticipated that businesses will have until their group plan renewal date in 2015 to be in compliance, second businesses that have over 50 full time equivalents will have to provide access to qualifying coverage or pay the “shared responsibility payment”. Now is the time to begin the process of determining if we are a LARGE employer or a small employer and if we meet the 50 full time equivalent threshold.

The IRS just release a FAQ information sheet to address the issues of “shared responsibility payments” and how to determine if the company is liable regarding the number of employees. Here is a summary of some of the questions that were addressed.

  1. What constitutes “full” time? An employee who averages over 30 hours per week will be considered “full” time for calculation of total employees.
  2. Do Part Time employees count toward the total? Yes. Part Time hours will totaled to get 30 hours equaling a full time equivalent.
  3. Do related companies have to be totaled together? Yes. As a long standing tradition with the IRS, companies with common ownership will be treated as one company for the 50 FTE calculations. However if either or both companies fail to meet the mandatory coverage or cost guidelines they will be assessed the penalties individually.
  4. What numbers are used to determine if we meet the 50 employee threshold if we have a fluctuating workforce? A company can use any sample six month period from 2014 , January through June for instance, to determine if they meet the 50 employee threshold for January 1, 2014. However if the company has 50 or more employees on January 1 they will need to adopt the guidelines.
  5. How will Shared Responsibility Payments be assessed? If an employer does not offer coverage or does not offer coverage that meets the minimum criteria for benefits and/or costs and an employee receives a premium tax credit on their personal taxes then the Shared Responsibility Payment is due. Once the employee files their tax return and IRS knows the premium tax credit was claimed a notice of payment due will be sent to the employer. The employer will have an opportunity to respond to the assessment. If the employer cannot verify that the employee did not qualify for the premium tax credit payment will be due. The Shared Responsibility Payment will not be paid on any current tax form.
  6. How much is the Shared Responsibility Payment? For a company with over 50 FTE’s that does not offer coverage the payment will be 1/12 of $2000 per month for every month that coverage is not offered multiplied by the number of FTE’s over 30. If a company offers coverage but it does not meet the minimum guidelines regarding benefits, cost and/or application and an employee obtains coverage through the Healthcare Exchange and receives a premium credit the payment will be 1/12 of $3000 per employee that receives the premium tax credit.
  7. What are the minimum guidelines regarding benefits? The plan must cover a minimum of 60% of the employee health care costs for the Essential Health Benefits.
  8. What is the minimum guideline for employee cost? The individual only coverage cannot cost the employee more than 9.5% of their household income. Employers are allowed to use the employee W-2 Box 1 wages instead of household income.
  9. What is the minimum application of coverage? The employer has to offer coverage to at least 95% of employees.
  10. What if we offer multiple plans? The cost threshold will be calculated on the lease expensive plan offered that meets the coverage guidelines.

If you would like to read the FAQ posted by the IRS you can use this link,

There are still a number of guidelines expected in the next few months regarding the PPACA. We will try to keep you updated as they are released. If you have any questions regarding your specific benefit plan please do not hesitate to give us a call (615-542-1919) or email

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