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December 13, 2012 at 07:44 AM
Q: Can you provide examples of the employer mandate tax penalties?
A: The five examples that follow cover a range of employer tax scenarios.
Example A: The large employer does not offer coverage, but no full-time employees receive credits for exchange coverage. No penalty would be assessed.
Example B: The large employer offers coverage and no full-time employees receive credits for exchange coverage. No penalty would be assessed.
Example C: The large employer does not offer coverage, and one or more full-time employees receive credits for exchange coverage. The annual penalty calculation is the number of full-time employees minus 30, times $2,000. The penalty does not vary if only one employee or all fifty employees received the credit; the employer’s annual penalty in 2014 would be $40,000 calculated as follows:
50 – 30 = 20
20 x $2,000 = $40,000.
Example D: The employer offers health plan coverage, but one or more full-time employees receive credits for exchange coverage. The number of full-time employees receiving the credit is used in the penalty calculation for an employer that offers coverage. The annual penalty is the lesser of the following:
- The number of full-time employees minus 30, multiplied by $2,000, or $40,000 for the employer with fifty full-time employees, as shown in Example C, or
- The number of full-time employees who receive credits for exchange coverage, multiplied by $3,000.
Thus, for an employer that hires only full-time employees, hiring that fiftieth employee could trigger a penalty of $40,000 if the employer does not offer health coverage to its employees. This will likely affect hiring for small employers close to the “applicable large employer” fifty full-time-equivalent employee limit.
