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13754: Employer Shared Responsibility Provisions (ACA)


1040 Individual Generally

Which employers are subject to the Shared Responsibility Provisions of the Affordable Care Act (ACA)?


Applicable large employers (ALEs) must offer affordable minimum essential coverage which provides a minimum value to full-time employees and their dependents.  If they do not they may have to make an employer shared responsibility payment (SRP).

Whether an employer would be considered to be an ALE is determined each calendar year.  This determination depends on the average size of the workforce during the prior year.  More details are available on the IRS website here:  How to Determine if an Employer is an ALE.

The Shared Responsibility Provisions are effective 1/1/2015 but transition relief from certain requirements is available for 2015. For more information on the transition relief available see the IRS website here: SRP Relief for 2015 Plan Years

ALEs also have information reporting responsibilities for the coverage offered. The employers send reports to employees and the IRS on forms created by the IRS for this purposes. An employer with sponsored self-insured health insurance coverage has insurer information reporting responsibilities whether or not the employer is an ALE. For more information on ALEs, see the IRS Center for Applicable Large Employers: Info Center for ALEs.

There are two types of Shared Responsibility Payments that an Applicable Large Employer (ALE) may owe to the IRS:

  1. Employers who fail to offer affordable minimum essential coverage
  2. Employers who fail to offer affordable minimum essential coverage that provides minimum value

For either type of employer shared responsibility payment to apply to an ALE member, at least one full-time employee must receive the premium tax credit for purchasing coverage through the Marketplace. An ALE can only be subject to one (not both) of the payment types.

Failure to Offer Minimum Essential Coverage
The annual payment is calculated at a rate of $2,000 for each full-time employee, after excluding the first 30 full-time employees from the calculation.

The IRS will determine whether an ALE member owes this payment on a month-by-month basis. The $2,000 amount will be indexed for inflation beginning in 2015. 

Part-time employees and full-time equivalent employees do not factor into this calculation. Also, certain full-time employees are not included in this payment calculation.  Full-time employees with coverage from the employer or from another source do factor into this payment. For more information:Federal Register - SRP for Employers.  

Transition relief for calculating this employer shared responsibility payment is available for 2015. See FAQ on the SRP for additional information.

Failure to Offer Affordable Minimum Essential Coverage that Provides Minimum Value
If this type of employer shared responsibility payment is owed, the annual payment will be $3,000 for each full-time employee who received the premium tax credit.

The IRS will determine whether an ALE member owes this payment on a month-by-month basis. The $3,000 amount will be indexed for inflation beginning in 2015.

The total amount of this second type of employer shared responsibility payment is limited. It cannot exceed the amount that the employer would have owed had it been liable for the first type of employer shared responsibility payment.

Part-time employees and full-time equivalent employees do not factor into this calculation. Also, certain full-time employees are not included in this payment calculation. For more information see Federal Register - SRP for Employers.

For more information on these payments and how they are calculated, please see the IRS website at:Types and Calculation of Employer Payments.


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