Employer Mandate Penalty Calculator

The Employer Mandate Penalty Calculator is currently undergoing maintenance. Please check back for future availability.

Consulting Advisors: Brian G. Muse, Elizabeth J. Atkinson, James Anelli, David N. Hoffman and Patrick J. Hurd of LeClairRyan's Affordable Care Act Team

In 2015, the employer shared responsibility (often referred to as the "employer mandate" or the "pay or play mandate") requirements under the Affordable Care Act (ACA) will take effect. The mandate generally requires applicable large employers (ALEs) - employers that employ an average of at least 50 full-time employees, including full-time equivalent employees (FTEs) - to either offer affordable health coverage that provides minimum value to full-time employees and their dependents or pay a penalty if at least one full-time employee receives subsidized coverage through the Health Insurance Marketplace (also known as the Public Marketplace or the Public Exchange).

A full-time employee is an employee who works, on average, at least 30 hours of service per week or 130 hours of service in a calendar month. This includes actual hours worked and periods of paid time off.

The final regulations implementing the employer mandate, issued in February, 2014, made some changes to the proposed regulations:

  • Beginning in 2015, employers with 100 or more full-time employees or FTEs must pay a penalty under Sections 4980H(a) and (b) of the Internal Revenue Code (IRC) if they do not offer affordable, minimum value health coverage to at least 70 percent of their full-time employees and their dependents (this reverts back to 95 percent for 2016 and beyond).
  • IRC Section 4980H(b) contains an additional penalty for failing to offer coverage while meeting the applicable threshold. This means that employers may be assessed a penalty for each full-time employee that is not offered coverage (and that receives a premium tax credit on the Public Exchange) even if the employer offers coverage to at least 70 percent (95 percent for 2016 and beyond) of their full-time employees and their dependents.
  • Employers with 50 - 99 full-time employees or FTEs have until 2016 to comply with the coverage mandate, as long as the employer certifies that it has not reduced its workforce to drop under the 100 employee threshold, reduced work hours or materially changed or reduced benefits under an existing health plan.

Employers with fewer than 50 employees are still exempt from the employer mandate requirements.

This penalty calculator is designed to be general in nature to help an employer determine if it is subject to the employer mandate, and if so, what the potential penalties might be based on the number of full-time employees. More in-depth analysis tailored to an employer's unique situation is required in order to obtain an exact determination at a particular point in time.

Warnings

  • ALE status is determined on a controlled group basis. This means that two or more companies that have common ownership, or are otherwise related, are often treated as a single employer, and all employees of the controlled group (such as employees across affiliated companies) are counted when determining ALE status. The ACA will apply to such affiliates even if they have fewer than 50 full-time employees or FTEs.
  • Companies must ensure that independent contractors are properly classified. If an independent contractor is misclassified, that individual may be considered an employee for the purpose of determining whether an employer is an ALE.
  • Keep in mind that an employee's hours of service include each hour for which an employee is paid or entitled to payment and includes hours worked and hours for which payment is due for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence.

The decision to "pay or play" is quite complex and goes beyond comparing the cost of the penalty to the cost of providing coverage since there are numerous tax considerations that must be taken into account. In addition to cost, an employer may want to consider other factors such as culture, employee morale and competitiveness.

You Entered:

Enter the number of full-time employees:

Enter the total number of hours worked by all part-time employees in a month:

Enter the number of full-time employees*:

*A full-time employee is an employee who works, on average, at least 30 hours of service per week or 130 hours of service in a calendar month. This includes actual hours worked and periods of paid time off.

Enter the total number of hours worked by all part-time employees* in a month:

*Part-time employees are those employees working fewer than 30 hours per week.

The calculator determines the number of full-time equivalent employees, which equals the number of full-time employees plus the number of hours of service worked in a month by part-time employees, divided by 120, to determine if an employer meets the 100-employee threshold for 2015 and/or the 50-employee threshold for 2016.

Results:

Based on the information provided, you have a combined total of full-time employees and FTEs. Since you have 50-99 FTEs you have until 2016 to comply with the coverage mandate (as long as you can meet the certification requirements pertaining to the 2015 exemption discussed above).

Since you have fewer than 50 FTEs, you are not subject to the employer mandate. Note: The penalty calculation is done on a monthly basis. An employer's status can change for a given month based on changes in the employer's workforce.

Beginning in 2016, you are subject to the employer mandate and may be assessed one of two penalties.

1. "No coverage" penalty: If you do not offer coverage to your full-time employees (and their dependents), and at least one full-time employee receives subsidized coverage through the Marketplace, your estimated annual penalty in 2016 is $. The no coverage penalty is $2,000 multiplied by the number of full-time employees (excluding the first 30 full-time employees). An employer does not pay a penalty for part-time employees.

Since you have 100 or more FTEs, beginning in 2015, you are subject to the employer mandate and may be assessed one of two penalties.

1. "No coverage" penalty: If you do not offer coverage to your full-time employees (and their dependents), and at least one full-time employee receives subsidized coverage through the Marketplace, your estimated annual penalty in 2015 will be: $. The no coverage penalty is $2,000 multiplied by the number of full-time employees (excluding the first 80 full-time employees). An employer does not pay a penalty for part-time employees.

Your estimated penalty for 2016 is $. In 2016, the no coverage penalty is $2,000 multiplied by the number of full-time employees, excluding the first 30 full-time employees. An employer does not pay a penalty for part-time employees.

2. "Unaffordable/inadequate coverage" penalty (including the penalty for failing to offer coverage while meeting the applicable threshold): If you offer coverage that is considered unaffordable or does not provide minimum value, and at least one full-time employee receives subsidized coverage through the Marketplace, you may be assessed a penalty of $3,000 for each full-time employee receiving subsidized coverage, not to exceed the "no coverage" penalty.

Under this provision, you may also be assessed a penalty for each full-time employee that is not offered coverage (and that receives a premium tax credit on the Public Exchange), even if you offer coverage to at least 70 percent (95 percent for 2016 and beyond) of your full-time employees and their dependents.

The below chart illustrates potential penalties for 2015 and 2016, based on providing coverage and still having employees eligible to receive subsidized coverage.

2016
Number of full-time employees receiving premium assistance
Approx. % of full-time employees % % % % %
Penalty for unaffordable / inadequate coverage $ $ $ $ $
2015
Number of full-time employees receiving premium assistance
Approx. % of full-time employees % % % % %
Penalty for unaffordable / inadequate coverage $ $ $ $ $
 
2016
Number of full-time employees receiving premium assistance
Approx. % of full-time employees % % % % %
Penalty for unaffordable / inadequate coverage $ $ $ $ $
2015
Number of full-time employees receiving premium assistance
Approx. % of full-time employees % % % % %
Penalty for unaffordable / inadequate coverage $ $ $ $ $
 
2016
Number of full-time employees receiving premium assistance
Approx. % of full-time employees % % % % %
Penalty for unaffordable / inadequate coverage $ $ $ $ $