Large Employer Mandatory Health Coverage

Beginning in 2015, large employers, generally those with 50 full-time employees in the prior calendar year, that

• Do not offer coverage for all their full-time employees,
• Offer minimum essential coverage that is unaffordable (employee contribution being more than 9.5% of the employee’s household income), or
• Offer minimum essential coverage where the plan’s share of the total allowed cost of benefits is less than 60% (i.e. less than the bronze coverage),

will be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state or federal exchange and qualified for either tax credits or a cost-sharing subsidy previously discussed.

Implementation Delayed: This provision of the new health care legislation was meant to have taken effect by 2014. Intense lobbying from the business community, however, which cited lack of time to prepare for the new requirement, has prompted the Obama Administration to delay implementation by one year, to 2015.

Interaction with Premium Credit: Generally, if an employee is offered affordable minimum essential coverage under an employer-sponsored plan, he is ineligible for a premium tax credit and for cost-sharing reductions for health insurance purchased through a state or federal exchange.

If the coverage is unaffordable (see above), however, or the plan’s share of benefits is less than 60%, then he is eligible, but only if he declines to enroll in the coverage and purchases coverage through the exchange instead.

Penalty for Employer Not Offering a Health Care Plan: An applicable large employer would be liable for the penalty (figured monthly) if:

The excise tax penalty for any month would be $167 ($2,000/12) times the number of full-time employees in excess of 30.


Penalty - Employees Qualify for Premium Tax Credits or Cost-Sharing Assistance – An applicable large employer would be liable for the penalty (figured monthly) if:



The excise tax penalty for any month would be $250 ($3,000/12) times the number of full-time employees that received premium tax credit or cost-sharing reductions through an exchange, but would not exceed the penalty imposed had the employer not offered health care insurance.

Penalty Decision Tree The flow chart below provides an overview of the large employer health care excise tax. 

Large Employer Health Coverage Excise Tax Decision Tree



Applicable Large Employer An “applicable large employer” is one that employed an average of at least 50 full-time employees on business days during the preceding calendar year (for an employer that was not in existence throughout the preceding calendar year, the determination is based on the average number of employees reasonably expected to be employed on business days in the current calendar year).

Seasonal Workers But, under an exemption, an employer will not be considered to employ more than 50 full-time employees if: (a) the employer’s workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year; and (b) the employees in excess of 50 employed during that 120-day (or fewer) period are seasonal workers, e.g., retail workers employed exclusively during the holiday season. Special rules apply to construction industry employers.

Full-time-employee: For purpose of complying with the 50 full-time-employee requirement, count those working 30 hours or more per week.

Part-Time Employees Solely for determining whether an employer is an applicable large employer, an employer will also have to include for that month the number of full-time employees determined by dividing (a) the aggregate number of hours of service of employees who are not full-time employees for the month by (b) 120.



Penalty Deductibility This excise tax penalty is nondeductible under the general rules for excise taxes.

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