Large Employer 50 +

Employer Shared Responsibility Provision

Starting January 1, 2015, the ACA’s Employer Shared Responsibility provision takes effect. There are two parts:

  • Employer Reporting Requirements:
    • Under IRC § 6056, large employers must report information about health coverage offered to full-time employees. To comply with the reporting requirement, prepare and distribute Form 1095-C to the employee and file copies, along with transmittal Form 1094-C, with the IRS.
    • Under IRC § 6055, large employers with self-funded plans must report information about the coverage provided to each individual. To comply with this reporting requirement, prepare and distribute Form 1095-B to plan enrollees and file copies, along with transmittal Form 1094-B, with the IRS. If also subject to § 6056, Forms 1095-C and 1094-C may be used to satisfy both the § 6055 and § 6056 requirements.

For calendar year 2015, the first reports are due in early 2016.

  • Employer Coverage Offer (often called “the Employer Mandate” and “Play or Pay”): Employers may be assessed a penalty for failure to offer health coverage to full-time employees if at least one employee receives a government subsidy to buy individual coverage through an Exchange (Marketplace).

Applicable Large Employer: Employers with 50 or more full-time-equivalent (FTE) employees are subject to the Employer Shared Responsibility provision for 2015. Small employers are exempt. The employer must determine its FTE count for 2014 in order to confirm its responsibilities for 2015. Related employers in a controlled group are counted together to determine the number of FTEs. Generally, each full-time employee (i.e., 120 hours of service or more per month) counts as one FTE. Each part-time employee counts as a fraction of one FTE (i.e., divide the employee’s hours of service per month by 120). Employers with seasonal workers, usually in the agricultural or retail industries, may be able to take advantage of a special rule to subtract the seasonal workers from the employer’s FTE count.

Employers that are subject to the Employer Shared Responsibility provision for 2015 (based on their 2014 FTE count) may qualify for one of several available transition relief provisions to delay compliance under the Play or Pay portion for several months or into 2016. For example, transition relief is available for certain employers with 50 – 99 FTEs and/or for certain employers with non-calendar year health plans.

Starting with Basics

Employers that offer health care coverage to employees are responsible for complying with many of the provisions of the Affordable Care Act (ACA). Most health reform changes apply regardless of the employer’s size, but some changes apply only to small employers and other changes apply only to large employers. Even employers that do not offer any coverage need to comply with certain requirements to distribute notices to workers or submit reports to federal agencies.
The effective dates of most ACA provisions usually are based on the employer’s group health “plan year” starting date. Other items take effect on a specifc calendar date. Further, whether or not a provision applies often depends on the employer’s size or on the type of group policy.
“Large Employer” generally means an organization (including subsidiaries) with 50 or more full-time and full-time-equivalent employees.
“Large Group” refers to the type of group health insurance policy that is sold to groups over a certain size. Policy requirements, and the provisions that determine the group’s size, are defined by each state according to its state insurance law. Generally, “large group” policies are subject to fewer policy design requirements than “small group” policies. In many states, “large group” policies are available to groups with 50 or more employees, while other states require at least 100 employees. For details about your state’s insurance law and policy options, consult an agent or broker licensed in that state.
“Plan Year” is the period (usually a 12-month period) that is identifed in the plan’s ERISA document or Form 5500. For non-ERISA plans, the plan year is the benefit year or policy year.
Ongoing Requirements for Notices and Reports
• Employer Notice about Health Insurance Exchanges (Marketplaces) — Employers must provide a written notice to all full-time and part-time employees, whether or not benefits eligible, within 14 days of hire. The federal notice explains the availability of the Health Insurance Exchanges (Marketplaces) and the circumstances under which employees may be eligible for subsidies to buy coverage through an Exchange.
This requirement applies to all employers covered by the Fair Labor Standards Act (FLSA), including employers that do not offer health coverage.
Employers can satisfy the Employer Exchange Notice requirement by using one of the following DOL model notices, filling in the blank sections as needed, and distributing the completed notice to all employees within 14 days of hire:
• Employers who currently offer health insurance to any or all employees can use this notice:
• Employers who do not offer health insurance to any employees can use this notice:
• Summary of Benefits and Coverage (SBC) — Health insurers, and employers with self-funded health plans, must provide an SBC for each plan describing its benefits and coverage using a standardized format. ACA regulations require that the SBC be provided in several instances (by the first day of open enrollment, by the first day of coverage if there are any changes, upon special enrollment events, upon request, and prior to off-renewal changes). The DOL provides samples and instructions at regulations/summaryofbenefits.html.
• Grandfathered Plan Notice — Employers with a grandfathered plan must review it to confirm that it still qualifies for grandfathered status. If so, materials describing the plan’s benefits must include a notice regarding the plan’s status as a grandfathered plan. The notice must include contact information for questions or complaints. Note that plans that lose grandfathered status immediately become subject to the same health reform requirements as nongrandfathered plans.
• Patient Protection Notice — Nongrandfathered health plans must include a notice regarding each participant’s right to designate a primary care physician and to obtain obstetrical or gynecological care without prior authorization.
• W-2 Reporting of Employee Health Coverage Cost — Employers must report the total cost of each employee’s health coverage on Form W-2 (box 12). This item is informational only and has no tax consequences. The requirement does not apply to employers that filed fewer than 250 Forms W-2 for the prior tax year.