Starting in 2015, full-time employees in the U.S. will be entitled to have the option of getting health insurance through their employers so long as the employer has more than 50 full-time equivalent (FTE) employees. This new rule is mandated by the Affordable Care Act (ACA), also known as "ObamaCare."

Once the mandate goes into effect, employers will have two options: provide a health insurance plan to their full-time employees or pay an "Employer Shared Responsibility Payment" on their federal tax return.

Understanding the Employer Mandate

  • The Employer Shared Responsibility Payment is charged to help improve health insurance quality, availability, and affordability in the U.S. The employer mandated fee will provide financial support to the health insurance marketplace and to pay off for undisbursed emergency health care expenses given to uninsured workers. Thus, the name "shared responsibility payment."
  • The Employer Shared Responsibility Payment (yearly employer mandate fee) is charged to most businesses that do not provide health insurance to their full-time workers and have more than 50 FTE workers (some exceptions apply to employers with 99 or fewer employees who do no reduce insurance coverage after February 2014 or reduce the number of employees simply to go below this employee cap).
  • To determine an employer's full-time equivalent workforce, part-time employee weekly hours are added together and divided by 30 and then added to the number of employees who each work at least 30 hours per week. This number determines whether an employer is subject to the mandate and what the employer shared responsibility payment is. (Most employers with more than 50 FTE employees must pay.)
  • If coverage is provided only for part of a year, the payment is prorated so that each month in which sufficient coverage was offered reduces the payment due by 1/12 of the total.
  • Employers with over 100 full-time workers should insure their employers starting 2015.
  • Those employing 25 or less FTE workers since 2010 are given retroactive health care tax credits.
  • The Employer Shared Responsibility Payment is not tax deductible. 

For more information, see healthcare.gov and the IRS's FAQ on the Employer Shared Responsibility policy.