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Under the ACA, beginning in 2014 large employers (over 50 employees) who offer health insurance to full time employees are subject to "shared responsibility" requirements. Under these requirements if an eligible employee chooses to waive coverage under the employer plan and instead enrolls in a subsidized plan through an exchange the employer may be subject to a $3,000 annualized fine under an "affordability" test.
The affordability test offered in the ACA suggests that if the cost of coverage exceeds 9.5 percent of the employees household income then the coverage is "unaffordable". Household income however is not generally information that an employer would be aware of, so the IRS is proposing a "safe harbor" for employers.
This proposed safe harbor would allow an employer to rely on a calculation that does not require collecting information on “household” income. Rather the employer need only test against 9.5 percent on the employees income in determining if their sponsored plan is affordable or not. The IRS is accepting comments on this until December 31, 2011.
New SevenHills Client Service:
Because of the significance of this penalty, SevenHills will now assist clients by including a calculation that identifies potential penalty situations. This calculation will be performed during the renewal process for clients where sufficient data is available.
For more information about the ACA and how it may affect you please feel free to contact your SevenHills advisor.
Thank you!
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