Summary Of Employer Shared Responsibility Payments (“ESRPs”)
By Melissa Shimizu
Under the Affordable Care Act (ACA), applicable large employers (ALEs) are required to offer full-time employees minimum essential health care coverage that is affordable and provides minimum value. If they do not, and a full-time employee receives a premium tax credit to purchase individual coverage through a marketplace, the employer may be assessed an employer shared responsibility payment (ESRP). The amount of the penalty depends on the number of full-time employees to which the ALE made an offer of coverage.
If an ALE makes an offer of coverage to fewer than 95 percent of its full-time employees, and one or more full-time employees receive a premium tax credit, the ESRP in 2015 is generally equal to the number of full-time employees minus 80 (because there was transitional relief available in 2015), multiplied by $2,260. This is called the subsection (a) penalty because it comes from Section 4980H(a). For plan years beginning on or after January 1, 2016, the aforementioned transitional relief was not available and the ESRP calculation will only be reduced by 30 employees, rather than 80.
If, however, it makes an offer of coverage to at least 95 percent of its full-time employees, and one or more of its full-time employees receives a premium tax credit, the ESRP is calculated for each month. This is called the subsection (b) penalty because it comes from Section 4980H(b). For 2015, the amount of the ESRP for any given month is equivalent to the number of full-time employees who received a premium tax credit for that month multiplied by one-twelfth of $2,080.