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The employer mandate applies to Applicable Large Employers (ALEs) with 50 or more full-time equivalent (FTE) employees. The employer mandate requires ALEs to offer full-time employees and their dependent child(ren) under the age of 26 minimum essential coverage (MEC) that is affordable and meets minimum value requirements, or risk paying a tax penalty.

Generally, employers with 100 or more FTEs in 2014 will be subject to the employer mandate beginning with the first day of their plan year in 2015 (providing the plan year was not modified after December 27, 2012 to begin at a later date). Employers with 50-99 FTEs in 2014 who qualify for transition relief, may be able to delay implementation until January 1, 2016, or in some cases the first day of their plan year in 2016.

ALEs subject to the employer mandate in 2015 may be subject to penalties if an employee applies for coverage in the Individual Marketplace and is deemed eligible for a premium tax credit either because the employee did not receive an offer of MEC or the coverage offered did not meet minimum value or affordability requirements. The table below summarizes the scenarios in which ALEs would pay a penalty.


*ALE must meet specific transition rules to qualify for reduced 2015 penalties.


A = Monthly Penalty Amount

B = Number of months MEC not offered or number of months full-time employee received premium tax credit

C = Number of full-time employees working 30 or more hours per week

D = Number of full-time employees working 30 or more hours per week that enroll in an Individual Marketplace plan and receive premium tax credits.

Important Terms

Minimum Essential Coverage (MEC) - a group health plan that is either a governmental plan or coverage offered in a state’s small or large group market. This includes self-funded plans but does not include excepted benefits such as HRAs.

Minimum Value – plan covers at least 60% of the allowed cost under the plan.

Affordability – a plan is deemed affordable if the employee-only premium does not exceed the specified percentage of the employee’s household income (9.56% in 2015). The following safe harbor rules can be used when household income is not available, but plans must continue to use 9.5% as the specified percentage: Box 1 of W-2 wages, Rate of Pay, or Federal Poverty Line.

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