Report Discusses Employer Penalties under PPACA

August 11, 2011 ( – The Congressional Research Service has published “Summary of Potential Employer Penalties Under the Patient Protection and Affordable Care Act (PPACA).”

The report describes and illustrates the penalties, when applicable beginning in 2014, to employers under the new health insurance reform law – specifically, certain employers with at least 50 full-time equivalent employees with one or more of their full-time employees obtaining a premium credit through an exchange. An individual may be eligible for a premium credit either because the employer does not offer coverage or the employer offers coverage that is either not “affordable” or does not provide “minimum value.”  

The report said an employer will not pay a penalty for any part-time worker, even if that part-time employee receives a premium credit. However, if an employer is determined to be a large employer, it could still potentially face a penalty for each month that a full-time seasonal worker received a premium credit for exchange coverage.   

A “large employer” is an employer who employed an average of at least 50 full-time equivalent employees on business days during the preceding calendar year. In order to determine whether an employer is a “large employer,” both full-time and part-time employees are included in the calculation. “Full-time employees” are those working an average of at least 30 hours per week. The number of full-time employees excludes those full-time seasonal employees who work for up to 120 days during the year. The hours worked by part-time employees (i.e., those working less than 30 hours per week) are included in the calculation of a large employer, on a monthly basis, by taking their total number of monthly hours worked divided by 120.  

In 2014, the monthly penalty assessed to employers who do not offer coverage will be equal to the number of full-time employees minus 30 multiplied by one-twelfth of $2,000 for any applicable month. After 2014, the penalty payment amount would be indexed by the premium adjustment percentage for the calendar year.  

In 2014, the monthly penalty assessed to the employer for each full-time employee who receives a premium credit will be one-twelfth of $3,000 for any applicable month. However, the total penalty for an employer would be limited to the total number of the firm’s full-time employees minus 30, multiplied by one-twelfth of $2,000 for any applicable month. After 2014, the penalty amounts would be indexed by the premium adjustment percentage for the calendar year.  

Finally, those firms with more than 200 full-time employees that offer coverage must automatically enroll new full-time employees in a plan (and continue enrollment of current employees). Automatic enrollment programs will be required to include adequate notice and the opportunity for an employee to opt out. Although most of the provisions discussed in the report are not effective until 2014, CRS said, this particular provision could be in effect as soon as the Secretary of Labor promulgates regulations.  

The report also noted that beginning in 2014, large employers will have certain reporting requirements with respect to their full-time employees. As prescribed by the Secretary, they will have to provide a return including the name, address, and employer identification number; a certification as to whether the employer offers its full-time employees (and dependents) the opportunity to enroll in minimum essential overage under an eligible employer-sponsored plan; the length of any waiting period; months coverage was available; monthly premiums for the lowest-cost option; the employer plan’s share of covered health care expenses; the number of full-time employees; and the name, address, and tax identification number of each full-time employee.   

Additionally, an offering employer will have to provide information about the plan for which the employer pays the largest portion of the costs (and the amount for each enrollment category). The employer must also provide each full-time employee with a written statement showing contact information for the person required to make the above return, and the specific information included in the return for that individual.