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Small Business Employee Benefits and HR Blog

FAQ - Will We Pay a Penalty in 2015 for Not Offering Health Insurance?

There has been a lot of confusion surrounding the Affordable Care Act (ACA’s) employer shared responsibility (ESR) provision, also called the employer mandate. Many employers are wondering about whether the ESR affects their business. According to the U.S. Treasury Department, “approximately 96 percent of employers are small businesses and have fewer than 50 workers and are exempt from the Employer Responsibility Provisions.” Nevertheless, “Will we pay a penalty in 2015 for not offering health insurance?” is a common question among employers. This article will will answer commonly asked questions about the penalty for not offering health insurance in 2015.

1. What is the Employer Shared Responsibility Provision?

The Employer Shared Responsibility (ESR) provision, also called the employer mandate, is the requirement for larger employers to either offer health insurance to employees, or pay a fee when an employee buys health insurance through the Marketplace and receives a premium tax credit.

2. When Does the Employer Shared Responsibility Provision Go into Effect?

The provision applies to employers with 50+ Full-Time Equivalent (FTE) employees, which allows additional flexibility for employers. 2015 is a "phase-in" year for the employer mandate. In 2015, there is transition relief available for some employers with 50-99 full-time equivalent (FTE) employees

3. Is Our Business Required to Offer Health Insurance in 2015?

If your business has fewer than 50 full-time-equivalent (FTE) employees, then you are not required to offer health insurance under the ACA.

4. Will Our Business Be Penalized for Not Offering Insurance in 2015?

If your business has fewer than 50 FTE employees, then there are no tax penalties and no employer shared responsibility fees for not offering health insurance.

5. How Do I Calculate Our FTE Employees?

Here are the steps for calculating the number of FTE employees you have:

  • Calculate the number of full-time employees. A full time employee works on average 30 hours per week in a given month.

  • Factor in your part-time employees. To calculate the FTE of part-time employees, add the number of hours worked by part-time employees in a given month. Divide the total number by 120.

  • Add together the full-time employees and the FTE of the part-time employees. If the sum is over 50, you are an “applicable large employer.” This means that the employer mandate does apply to your business.Calculating_FTE

Chart Source: Affordable Care Act 101

6. What If Our Business Grows to More Than 50 FTE Employees?

If you have more than 50 FTE employees and do not provide affordable, minimum value health insurance, you will be required to pay the employer shared responsibility fee if/when an employee purchases individual insurance and receives a premium tax credit.

For 2015, the Employer Shared Responsibility Fee is equal to the number of full-time employees the employer employed for the month (minus 80) multiplied by 1/12 of $2,000, provided that at least one full-time employee receives a premium tax credit/subsidy for that month.

If you are a larger employer, click here to read more about calculating ESR fees in 2015.

Do you have any questions about the requirement to provide health insurance to your employees?