Employer Shared Responsibility: How Much of Employees Health Insurance Are You Required to Pay?


Employer Shared Responsibility.

Employer Shared Responsibility essentially is a regulation which says that if an employer has the equivalent of more than 50 full-time employees, they are required to offer healthcare coverage for their employees and their dependents. If they do not, and one of their full-time employees seeks healthcare through The Exchange, the employer will be required to pay a tax penalty.

The tax penalty is $2000 for each full-time employee that is not covered after the first 30 employees. In other words, if you have 52 employees, subtract the first 30 and multiply the remaining 22 by $2000: you will pay $44,000 in tax penalties for the year.

What is a full-time equivalent employee?

An employee who works 30 + hours, that’s easy right? What if you have 100 part time employees? They could add up to 50 full time equivalent employees depending on how many hours they work. You can use this calculator to figure out how many full time equivalent employees you have.

If you are unsure of whether or not this regulation applies to you, contact our office and speak with one of our experts. They will be happy to review your case and walk you through your responsibilities and options.

If you do fall within this category, you should know:

The only way that you will be liable to pay the Employer Shared Responsibility Payment is if either:

  • You either don’t offer health insurance, or you offer health insurance to less than 95% of your full-time employees AND at least one of those full-time employees receives a premium tax credit to help pay for coverage through the marketplace.
  • You do offer health insurance to more than 95% of your employees but at least one of them receives a premium tax credit to help pay for coverage on the marketplace because the coverage you offered was either was unaffordable to that particular employee, or it did not meet the minimum value.

You’re probably wondering, “How can I determine whether the health insurance coverage I offer is affordable to my employee?”

The cost of health insurance cannot exceed 9.5% of an employee’s income. An employer can use one of three safe harbors to ensure that the coverage offered is affordable to an employee. These are (1) the Form W-2 wages safe harbor, (2) the rate of pay safe harbor, and (3) the federal poverty line safe harbor.
Under the Form W-2 safe harbor, an employer could determine affordability by referring to an employee’s wages from that employer. Wages for this purpose would be the amount required to be reported in box 1 of Form W-2.
The rate-of-pay safe harbor allows employers to take the hourly rate of pay for each employee who is eligible for health insurance, multiply that by a rate of 130 hours per month full-time status), and determine affordability based on the resulting wage amount. For salaried employees, the rate is based on 9.5% of their monthly salary.
To definitely guarantee that your coverage is affordable to your employee, you can offer coverage that costs less than 9.5% of the Federal Poverty Line for a single individual.
Of course, this short newsletter can only cover the basic aspects of the topic. Here are links for further reading, if you are interested in delving further into the subject:



If you have questions that are left unanswered, or if you’d rather talk to someone than read the fine print, contact us. We are happily available to answer any questions you may have.

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Just complete this census form and receive a proposal showing the best health insurance package options for you and your employees. We will make the process simple and enjoyable for you while capturing the maximum available benefits for your business.

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