Employer Shared Responsibility Payments And Reporting Requirements Under The Affordable Care Act: Code Sections 6055 And 6056

Employer Shared Responsibility Penalties

There are two types of employer shared responsibility payments, also known as pay or play penalties, under the Affordable Care Act (ACA).  The first penalty under Internal Revenue Code (Code) Section 4980H(a) is the penalty for failure to offer health coverage.  Effective for plan years beginning on or after January 1, 2015, a $2,000 annual penalty applies to a large employer that fails to offer at least 70 percent of its full-time employees (FTEs) health coverage.  For plan years beginning on or after January 1, 2016, the $2,000 penalty applies to an employer that fails to offer health coverage to at least 95 percent of its FTEs.  The $2,000 penalty is assessed on a monthly basis, but applies to all of an employer's FTEs, minus 30 FTEs (or minus 80 FTEs for 2015).