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Small Business Employee Benefits and HR Blog

Individual Shared Responsibility Payment - Examples

April 8, 2014
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This article provides a quick overview of the individual shared responsibility payment, and two examples of the payment for 2014.Individual_Shared_Responsibility_Payment_-_Examples

How Much is the Individual Shared Responsibility Payment?

Under the Affordable Care Act (aka ACA or Health Care Reform), all individuals are required to either purchase minimum essential health insurance coverage, qualify for an exemption, or else pay a fee at tax time. This is called the ACA's "individual shared responsibility payment" or "individual mandate". 

For 2014, the annual payment amount is the greater of:

  • 1% of your household income (minus the tax return filing threshold for your filing status), or

  • $95 per adult and $47.50 per child, limited to a family maximum of $285

The payment is capped at the cost of the national average premium for a bronze level health plan available through the Health Insurance Marketplaces in 2014. The annual payment amounts will increase over the first three years. 

Individual Shared Responsibility Payment Examples

The two examples below are provided by the IRS to show how to calculate the payment. The examples assume that the payment amount does not exceed the national average premium for bronze level coverage. The IRS notes that these examples are not estimates of current or future health insurance premium costs. 

Example 1: Single individual with $40,000 income

"Jim", an unmarried individual with no dependents, does not have minimum essential coverage for any month during 2014 and does not qualify for an exemption.

For 2014, Jim’s household income is $40,000 and his filing threshold is $10,150.

  • To determine his payment using the income formula, subtract $10,150 (filing threshold) from $40,000 (2014 household income). The result is $29,850. One percent of $29,850 equals $298.50.

  • Jim’s flat dollar amount is $95.

Because $298.50 is greater than $95 (and is less than the national average premium for bronze level coverage for 2014), Jim’s shared responsibility payment for 2014 is $298.50, or $24.87 for each month he is uninsured (1/12 of $298.50 equals $24.87).

Jim will make his shared responsibility payment for the months he was uninsured when he files his 2014 income tax return, which is due in April 2015.

Example 2: Married couple with 2 children, $70,000 income

"Eduardo" and "Julia" are married and have two children under 18. They do not have minimum essential coverage for any family member for any month during 2014 and no one in the family qualifies for an exemption.

For 2014, their household income is $70,000 and their filing threshold is $20,300.

  • To determine their payment using the income formula, subtract $20,300 (filing threshold) from $70,000 (2014 household income). The result is $49,700. One percent of $49,700 equals $497.

  • Eduardo and Julia’s flat dollar amount is $285, or $95 per adult and $47.50 per child. The total of $285 is the flat dollar amount in 2014.

Because $497 is greater than $285 (and is less than the national average premium for bronze level coverage for 2014), Eduardo and Julia’s shared responsibility payment is $497 for 2014, or $41.41 per month for each month the family is uninsured (1/12 of $497 equals $41.41).

Source: IRS.

For a detailed overview, see:

The Comprehensive Guide to the Small Business HRA

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