The Employer Shared Responsibility Provision

You may be liable for this payment if you don't offer the opportunity to enroll in eligible employer-sponsored plan for a calendar month to at least 95 percent of your full-time employees (and their dependents) and at least one of your full-time employee receives the premium tax credit (you will receive a Section 1411 Certification for each employee that receives the premium tax credit).

The payment amount is computed monthly. It is 1/12th of $2,000 multiplied by a certain number of your full-time employees. Your employees included in determining the payment are all your full-time employees except for employees in a limited non assessment period and reduced by 30.

You may be liable for this payment if you do offer your full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, but at least one of your full-time employees received the Premium Tax Credit (you received a Section 1411 Certification for that employee).

Generally, a full-time employee will receive the premium tax credit because the minimum essential coverage offered was not affordable, did not provide minimum value, or because the employee was not one of the at least 95 percent of full-time employees offered minimum essential coverage.

The payment amount is computed monthly. It is 1/12th of $3,000 multiplied by the number of your full-time employees for whom you received the Section 1411 Certification, excluding those employees that are in a limited non-assessment period and were offered the opportunity to enroll in minimum essential coverage that provided minimum value and met one or more of the affordability safe harbors. This payment will also not be greater than the first type of payment (no offer of coverage).

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.

In general, your full-time employees are, with respect to a calendar month, those employed an average of at least 30 hours of service per week. Alternatively, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week.

In determining whether you are an applicable large employer, the number of FTEs employed during the preceding calendar year is taken into account. All employees (including seasonal workers) who were not employed on average at least 30 hours of service per week for a calendar month in the preceding calendar year are included in calculating the FTEs for that calendar month.

Calculating the number of FTEs: The number of FTEs for each calendar month in the preceding calendar year is determined by calculating the aggregate number of hours of service for that calendar month for employees who were not full-time employees (but not more than 120 hours of service for any employee) and dividing that number by 120.

In determining the number of FTEs for each calendar month, fractions are taken into account; an employer may round the number of FTEs for each calendar month to the nearest on hundredth.

Count each hour for which an employee is paid, or entitiled to payment, for the performance of duties; and each hour for which an employee is paid, or entitled to payment 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 when counting employees' hours of service:

• Bona fide volunteers: Hours of service do not include any hour for services performed as a bona fide volunteer.
• Work-study program: Hours of service do not include any hour of services to the extent those services are performed as part of a Federal Work-Study Program or a substantially similar program of a State or political subdivision thereof.
• Services outside the United States: Hours of service do not include any hour for services to the extent the compensation for those services constitutes income from sources without the United States.

Even if you have 50 or more full-time employees during the prior calendar year, you may not be considered an applicable large employer if the employees in excess of 50 are seasonal workers.

If the sum of your full-time employees and full-time equivalents exceeds 50 for 120 days or less during the preceding calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days are seasonal workers, then you are not considered to employ more than 50 full-time employees (including FTEs) and you are not an applicable large employer for the current calendar year.

For this rule, four calendar months may be treated as the equivalent of 120 days, and the four calendar months and the 120 days are not required to be consecutive.

An employer not in existance throughout the preceding calendar year is an applicable large employer for the current calendar year if the employer is reasonably expected to employ an average of at least 50 full-time employees (taking into account FTEs) on business days during the current calendar year and it actually employs an average of at least 50 full-time employees (taking into account FTEs) on business days during the calendar year.

An employer is treated as not having been in existence throughout the prior calendar year only if the employer was not in existence on any business day in the prior calendar year.

The seasonal worker exception also applies to employers not in existence the preceding calendar year.

The weekly method allows you to measure your employees' hours of service based on periods of 4 or 5 weeks that overlap with either the first or last day of the calendar months.

• For months with 4 weeks, if the employee has at least 120 hours of service the employee is a full-time employee.
• For months with 5 weeks, if the employee has at least 150 hours of service the employee is a full-time employee.

Under this rule, the period you use to measure your employees' hours of service must either:

• Begin on the first day of the week that includes the first day of the calendar month and the last week does not include the last day (unless that week ends with the last day of the calendar month, in which case it is included), or
• Begin on the first day of the week after the first day of the calendar month and the last week includes the last day of the month (unless the week begins on the first day of the calendar month, in which case it is included).

An ongoing employee is an employee who has been continuously employed by you without any breaks in service.

A new employee is an employee who has not been previously employed by you.

An employee resuming services is an employee with a prior period of employment (such as a rehire or after a period of leave) and, according to the rehire and continuing employee rules, may be treated as either a new or ongoing employee.

Information on the rehire and continuing rules as they apply to the monthly measurement method, as well as international transfers, can be found in the ESRP Regulations.

The lookback measurement method works by using a period, the measurement period, where you count the hours of service for your employees.

The standard measurement period is used for ongoing employees (or an employee resuming services that is treated as ongoing) and the initial measurement period is used for a new employee (or an employee resuming services that is treated as a new employee).

Standard Measurement: The standard measurement period is 3 – 12 months and can begin on any day of any month. If an employee has an average of at least 30 hours of service per week during this period, that employee is treated as a full-time employee during the stability period that follows.

Initial Measurement: The initial measurement period is also 3 – 12 months. It can begin on either the new employee's start date (or the date an employee resumes services, if that employee is treated as a new employee), any day after the start date up to and including the first day of the first calendar month after the start date, or (if you are using the payroll period method) the first day of the first payroll period following the start date (even if later than the first of the following month).

This is an optional period that is no longer than 90 days. It begins immediately following the end of a measurement period and ends immediately before the start of the associated stability period.

For the initial measurement period, it 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.

If an employee has an average of at least 30 hours of service during the measurement period, the employee is a full-time employee through the whole stability period associated with that measurement period.

Subject to certain rules governing the length of the measurement and stability periods, you may use measurement periods and stability periods that differ either in length or in their starting and ending dates for categories of employees:

• Collectively bargained employees and non-collectively bargained employees,
• Each group of collectively bargained employees covered by a separate collective bargaining agreement,
• Salaried employees and hourly employees, and
• Employees whose primary places of employment are in different States.

For payroll periods that are one week, two weeks, or semi-monthly in duration, an employer is permitted use payroll periods as a measurement period so long as either the first payroll period or the last payroll period overlaps with the first day or last day of the measurement period – but not both.

More information about how the payroll period rull applies can be found in the ESRP Regulations.

An ongoing employee is an employee who has been employed for at least one complete standard measurement period.

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

An employee resuming services is one that is rehired after termination of employment or who is resuming service after another absence. Employees resuming services may be treated as a new employee or ongoing employee depending on how long the employee was employed with you before the absence and how long the employee was gone.

Information on the rehire and continuing employee rules, including rules on International Transfers, can be found in the ESRP Regulations.

Treatment as new employee: If the employee is treated as a new employee, determine the full-time status as you would for any other new employee.

Treatment as Ongoing Employee: If the employee is treated as an ongoing (or continuing) employee, determine the full-time status as you would for your other ongoing employees.

Anti abuse rule: In the case of the rehire and continuing employee rules, any hour of service is disregarded if the hour of service (or services giving rise to the crediting are requested or required of the employee) for a purpose of avoiding or undermining the employee rehire rules.