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Small Business Employee Benefits and HR Blog

ACA Employer Mandate - Affordability Definition for 2015

Under the Affordable Care Act's employer mandate (aka employer shared responsibility fee), large employers are required to either provide "affordable" coverage beginning in 2015 or potentially face penalties. For 2014, the definition of affordability was set at 9.5% of the employee’s income. For 2015, the definition of affordability is set at 9.56%.3867706307_08c8c47afa_z

While a relatively minor change, it is a reminder that the definition of affordability for the employer mandate may change.

Summary of Employer Mandate for 2015

As a quick recap, 2015 is a "phase-in" year for the employer mandate. In 2015, the provision only applies to employers with 100+ FTE employees and there is additional flexibility for employers. 

For 2015, if an employer with at least 100 full-time employees (including full-time equivalents) does not offer "minimum essential" and "affordable" coverage -- or offers coverage to fewer than 70% of its full-time employees (and their dependents) -- the employer will owe an Employer Shared Responsibility Fee IF one of their employees purchases a health plan through the exchanges and receives a federal tax credit or subsidy.

Updated Employer Mandate Affordability Test for 2015

For 2015, an employer’s coverage is considered unaffordable for any full-time employees who, in a given month, enroll in a health plan offered through their state exchange and are eligible to receive federal assistance. An employee is only eligible for federal assistance through the exchange if their required contributions for their employer's plan is greater than 9.56% (again, this percentage was revised from 9.5% in 2014).

This change was outlined in Rev. Proc. 2014-37.

While this is a relatively small change, it does serve as a reminder that the ACA guidelines are a moving target, and that definitions and guidelines will change. Each year, employers should review the rates with their health insurance broker to ensure compliance.

See also: Quick Guide to Calculating Employer Shared Responsibility Fees in 2015