Employer Responsibilities and Benefits (ACA)

What responsibilities and benefits does a taxpayer have as an employer under the Affordable Care Act (ACA)?

The size and structure of the workforce determines what applies to the employer. A small employer is generally considered to be one with fewer than 50 full-time employees. A large employer has 50 or more full-time employees (including full-time-equivalent employees). See the IRS page Employer Shared Responsibility Provisions.

Small Employers

Small employers may be eligible for a Small Business Health Care Credit to assist with the cost of providing coverage. This credit is taken on Form 8941, Credit for Small Employer Health Insurance Premiums.

"For tax years beginning after 2013, the credit is only available for a 2-consecutive-tax-year credit period.  The maximum credit is generally a percentage of premiums the employer paid during the tax year for certain health insurance coverage the employer provided to certain employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.  But the credit may be reduced by limitations based on the employer's full-time equivalent employees, average annual wages, adjusted average premiums, and state premium subsidies and tax credits."

Instructions for Form 8941

To be eligible to claim the credit, Small Employers must meet these three requirements:

  • You paid premiums for employee health insurance coverage under a qualifying arrangement.
  • You had fewer than 25 full-time equivalent employees (FTEs) for the tax year.
  • You paid average annual wages for the tax year of less than $56,000 per FTE.

To produce the Health Insurance Credit Worksheet, complete screen 8941 (Form 8941, Credit for Small Employer Health Insurance), which is accessible from the second Credits tab in data entry of the return.

After completing the data entry, view the return. Form 8941 should appear, along with worksheets Wks 8941 A and Wks 8941 B (in Drake15 and prior, the worksheets are labeled WK_8941A and WK_8941B).

Check the Instructions for Form 8941 for data flow from Form 8941.

For more information see Small Business Health Care Tax Credit Questions and Answers: How to Claim the Credit and the Instructions for Form 8941.

Large Employers

Starting in 2015, large employers must either:

  • offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents),
  • or potentially make an employer shared responsibility payment to the IRS.

In addition, large employers have information reporting responsibilities regarding minimum essential coverage offered to employees.  These responsibilities require employers to send reports to employees and to the IRS on new forms the IRS created for this purpose.  An employer that sponsors self-insured health insurance coverage – whether or not the employer is an ALE – has insurer information reporting responsibilities as a provider of minimum essential coverage.

Employer Shared Responsibility Provisions

Employers are required to report the value of health insurance coverage on each employee's W-2.  This information is reported in box 12 of Form W-2 with a code of DD. For more information see Form W-2 Reporting of Employer-Sponsored Health Coverage.

If the employer self-insures, a fee may be required, paid to help fund the Patient-Centered Outcomes Research Trust Fund.  For more information on this provision (6301), see Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers.

More Information

For more information, see the IRS website Affordable Care Act (ACA) Tax Provisions.