After much speculation the IRS released specific guidance for businesses regarding their potential liability related to the “shared responsibility” fees associated with the Affordable Care Act. It is important to note that the Affordable Care Act does not require businesses to provide health care coverage to their employee’s; it only requires the business pay the “shared responsibility” payment if it fails to meet the requirements. For some businesses it may actually be less expensive to pay the “shared responsibility” fee than provide health insurance. Here is a summary of the guidance.

Effective January 1, 2014 employers who have 50 or more full time equivalents will be responsible for the “shared responsibility” fee if they;
a. Fail to offer minimum coverage to their employees.
b. Fail to offer minimum coverage to at least 95% of their full time employees and at least one employee receives a premium tax credit to help pay for coverage through an Exchange.
c. Offers coverage to at least 95% of their employees but one of the employees not covered receives a premium tax credit to help pay for coverage through and Exchange
d. Offers coverage to at least 95% of their employees but the coverage does not meet the minimum requirements of covering 60% of allowable medical costs.
e. Offers coverage to at least 95% of their full time employees but the employee cost exceeds either 9.5% of the employee’s household income or 9.5% of the employees reported wages in Box 1 of the employees W-2.

So you may be asking, what is the “shared responsibility” fee assessed against a business? It depends on which scenario we are considering. For scenarios A and B the fee will be $2000 per year for every employee over 30. For scenarios C, D and E the fee is $3000 for every employee that receives the premium tax credit to purchase insurance through an exchange. These fees are calculated on a monthly basis.

There is a safe harbor provision for employers meeting all the criteria, they offer adequate coverage that meets the employee cost requirements, their employee should not be eligible for get premium tax credits at the Exchange. This is to protect employers who are meeting the requirements from being punished because of an employee’s personal preferences.

It is recommended that employers begin the evaluation process to identify the best way to manage the new guidelines. It is expected that the IRS and the Department of Health and Human Services will release several more updates before July of 2013 to give employers time to prepare for the January 1, 2014 deadline.