Introduction

Under the Affordable Care Act, the federal government, state governments, insurers, employers and individuals are given shared responsibility to reform and improve the availability, quality and affordability of health insurance coverage in the United States. This tool is specifically designed to help businesses with employees determine what rules under the Employer Shared Responsibility Provision (IRC Section 4890H) relate to them and what payment may be owed, if your company does not comply with its requirements or, in some circumstances, where any of your full-time employees claim the premium tax credit for paying for insurance policies on their own.

The size and structure of a workforce – small, large, or part of a group – helps determine what rules apply and when they start. In most cases employers must determine their “size” each year, by averaging the total number of employees, as it may vary from year to year. Generally businesses that are part of a larger business group must count all combined employee hours to determine responsibilities. There are designated measurement methods for doing this, which are explained in the regulations, on IRS.gov and within this tool. The measurement method used is up to each employer, but it must be used consistently.

Essentially, for employers, during 2015, that have a total equivalent of 50 or more employees, combining full time and qualifying part-time employee hours, are considered large employers and required to follow the regulation requirements for offering insurance coverage, to at least 95% of your employees and their families. (Note: For 2016, employers with between 50 and 99 employees may be eligible for exemption from the rules in certain circumstances. Visit the IRS.gov Transition Relief page for all allowable transition rules.

For employers who are subject to the provision, it requires you to:

• Offer minimum essential coverage that is affordable and provides minimum value to their full-time employees (and their dependents) or
• Make an employer shared responsibility payment to the IRS.

So as mentioned in our introduction, this estimator is designed to help employers:

• Determine whether the provision applies to your business,
• Determine the full-time status of your employees (which determines your responsibilities), and
• Know what the payment may be, if you are liable for it.

Remember, more information on this and other large employer provisions under the Affordable Care Act is available at the IRS Affordable Care Act tax provisions for large employers page. For more information about the shared payment, click on the next section below.

There are two types of payments:

• The payment under section 4980H(a): You may be liable for this if you do not offer minimum essential coverage to at least 95 percent of your full-time employees and at least one employee receives the premium tax credit.
• The payment under section 4980H(b): You may be liable for this if you do offer minimum essential coverage to at least 95 percent of your full-time employees, but at least one of your full-time employees receives the premium tax credit because that coverage is not affordable, doesn't provide minimum value; or that employee was one of the 5 percent that did not receive an offer of coverage.

If you are liable for the employer shared responsibility payment, you will only be liable for one of the two payments.

If one of your employees receives the premium tax credit, you will receive a Section 1411 certification.

More information on both payments are in the ESRP Regulation sections for the payment under 4980H(a) and payment under 4980H(b) and from the IRS Types of employer payments and how they are calculated page.

This estimator will help you understand the provision, so that you can determine whether you are subject to it and assist in determining your shared payment amount, if the requirements are not met.

Under the provision, you need to measure your employees' hours of service to determine their full-time status. The amount of employees ultimately determines your responsibilities and subsequently any payment that may be due. There are two methods used to make the full-time determination; the estimator also has an optional interactive guide to help you understand these methods. It is intended only as a guide to help you understand – it is not intended to make the full-time status determination for you.

See the Information You Need to Use the Estimator section below and read the information under the Instructions tab before you begin using this tool.

To use the estimator, you'll need certain information, including:

1. Information on yourself and
2. Information on your employees

You can get more information and IRS resources at the Employer Shared Responsibility Provisions.

An optional period you select that is no longer than 90 days that begins immediately after the end of a measurement period and ends immediately before the start of the associated stability period.

The administrative period also includes the period between a new employee's start date and the beginning of the initial measurement period, if the initial measurement period does not begin on the employee's start date.

Generally, coverage is affordable for an employee if the employee's required contribution of the annual premium for self-only coverage does not exceed an applicable percentage of the employee's household income for the year. Depending on the employee's household income, the applicable percentage is between 2 and 9.5 percent.

With respect to a calendar year, an employer that employed an average of at least 50 full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.

An employee that has previously been employed by you, but experienced a break in service (for example, due to termination and rehire or unpaid leave). Depending on the rehire and continuing employee rules, these employees can be treated as a new employee or as an ongoing employee.

Generally, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week.

The hours for which an employee is paid, or entitiled to payment, for the performance of duties for the employer; and each hour for which an employee is paid, or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

Certain hours are excluded from hours of service; for more information, see the ESRP Regulations.

As part of counting hours of service for your employees: 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week, and this 130 hours of service equivalency applies for both the look-back measurement method and the monthly measurement method for determining full-time employee status.

Under the lookback measurement method: A period of at least three but not more than 12 consecutive months that is used to determine the full-time status of your new employees. A new employee that averages at least 30 hours of service per week during the initial measurement period is treated as a full-time employee through the end of the associated stability period that follows.

The limited non-assessment period for certain employees refers to the limited period during which an employer will not be subject to an assessable payment under section 4980H(a) and in certain cases 4980H(b), with respect to an employee as set in the ESRP Regulations:

• The transition rule for an employer's first year as an applicable large employer.
• Under the monthly measurement method, when an employee is first otherwise eligible for an offer of coverage.
• Under the look-back measurement method, a non-variable, not seasonal, and not part-time employee's initial full three calendar months of employment.
• Under the look-back measurement method, new variable hour, seasonal, or part-time employees determined to be employed on average at least 30 hours of service per week.
• Under the look-back measurement method, a change in employment status during the initial measurement period for new variable hour, seasonal, or part-time employees.
• The partial calendar month where an employee's employment begins or terminates as it applies to the payments under 4980H(a) and 4980H(b).

An eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits provided to the employee under the plan (as determined under guidance issued by the Secretary of Health and Human Services) is at least 60 percent.

Under the look-back measurement method, a new employee is an employee who has been employed for less than one complete standard measurement period.

Under the monthly measurement method, a new employee means an employee who has not previously been employed.

Under the lookback measurement method, an ongoing employee is an employee who has been employed for at least one complete standard measurement period.

Under the monthly measurement method, an employee who has been continuously employed by you without any breaks in service.

With respect to any calendar month 1/12 of $2,000, adjusted for inflation.

This amount is multiplied by a certain number of your full-time employees for a calendar month to calculate the actual payment.

With respect to any calendar month, 1/12 of $3,000 – adjusted for inflation.

This amount is multiplied by a certain number of your full-time employees for a calendar month to calculate the actual payment

Under the lookback measurement method: A period you select that immediately follows and is associated with a standard measurement period or an initial measurement period (and if elected, the administrative period associated with that standard measurement period or initial measurement period).

Under the lookback measurement method: A period of at least three but not more than 12 consecutive months that is used to determine the full-time status of your employees. Employees that average at least 30 hours of service per week during the standard measurement period are treated as full-time employees through the end of the associated stability period that follows.

Generally, an employee that, based on the facts and circumstances at the employee’s start date, you are unable to determine whether the employee is reasonably expected to be employed on average at least 30 hours of service per week during the initial measurement period because the employee’s hours are variable or otherwise uncertain.

A waiting period is the period that must pass before coverage for an individual who is otherwise eligible to enroll under the terms of a group health plan can become effective. If an individual enrolls as a late enrollee or special enrollee, any period before such late or special enrollment is not a waiting period.