Search Penny Hill Press

Friday, August 9, 2013

Potential Employer Penalties Under the Patient Protection and Affordable Care Act (ACA)

Julie M. Whittaker
Specialist in Income Security

On Tuesday July 2, 2013, the Obama Administration posted a blog on employer requirements and the Patient Protection and Affordable Care Act (ACA, P.L. 111-148), as amended. Based on the White House blog, (1) the Administration plans to revamp employer reporting requirements, and therefore suspend employer reporting requirements for 2014, and (2) because employer payments are dependent on the reporting requirements, no payments will be collected in 2014. The Administration noted that these changes were in response to employers’ concerns about the reporting requirement.

On July 17, 2013, H.R. 2667, the Authority for Mandate Delay Act, passed the House. H.R. 2667 would delay by one year the applicable effective date for the employer requirements, employer penalties, and related reporting requirements specified under ACA.

This report provides information on the statutory requirements and the proposed regulations issued to implement these statutory requirements in December 2012. This report does not yet reflect the proposed Administration changes. For example, this report includes calculations of potential employer penalties which are based on formulas that would be applied beginning in 2014, according to statutory requirements. The report will be fully updated once additional information becomes available.

The White House blog posting is available at businesses-about-health-care-law.

The ACA increases access to health insurance coverage, expands federal private health insurance market requirements, and requires the creation of health insurance exchanges to provide individuals and small employers with access to insurance. To ensure that employers continue to provide some degree of coverage, the ACA includes a “shared responsibility” provision. This provision does not explicitly mandate that an employer offer employees health insurance; however, the ACA imposes penalties on “large” employers if at least one of their full-time employees obtains a premium credit through the newly established exchange. According to the Congressional Budget Office (CBO), employers are projected to pay $130 billion in penalty payments over a 10-year period.

The ACA sets out a two-part calculation for determining, first, which firms are subject to the penalty (e.g., definition of large), and, second, to which workers within a firm the penalty is applied. Because the treatment of part-time and seasonal workers differs across these two parts of the calculation, this has led to some confusion among policymakers and employers. For example, part-time employees are included in what is termed a full-time equivalent calculation to determine if an employer has at least 50 full-time equivalent employees (FTEs) and is thus considered large for purposes of applying the penalty. However, the actual penalty, if applicable, is levied only on full-time workers (those working at least 30 hours a week on average). This report discusses these definitions and the application to the employer penalty in greater detail.

The potential employer penalty applies to all common law employers, including an employer that is a government entity (such as federal, state, local, or Indian Tribal government entities) and an employer that is a nonprofit organization that is exempt from federal income taxes. If a franchise is owned by one individual or entity, employees in each of the franchises must be aggregated to determine the number of both full-time equivalent and full-time employees.

Date of Report: July 23, 2013
Number of Pages: 19
Order Number: R41159
Price: $29.95

To Order:

R41159.pdf   to use the SECURE SHOPPING CART


Phone 301-253-0881

For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.