Affordable Care Act Tax Penalty: Employers

ObamaCare has brought many changes to American health insurance coverage. Under the Affordable Care Act, employers are required to provide affordable health insurance for employees. If the employer is unable to or chooses not to provide affordable health insurance, it is required to pay an employer penalty.

In this post, we’ll take a closer look at how this impacts your business and your employees.

What are Employer Penalties?

Teachers provide a great example for illustrating employer penalties. The school corporation pays a set amount of money for each teacher’s insurance. Each teacher is then required to pay part of the premium as a co-pay. This amount cannot exceed 9.5% under the Affordable Care Act. If it does, the employer will be required to pay a $2,000 penalty (unless exempted).

How Do Employer Penalties Affect Companies?

If an employer does not provide insurance but is required by law to do so, the penalty is $2,000 for the whole year. This fee breaks down to $167 per month when divided by 12; insurance coverage is looked at monthly.

If an employee goes to the federal marketplace and purchases insurance because the insurance provided by his or her company is not affordable, the fee increases to $3,000 per employee. If an employer provides insurance, the employee cannot purchase coverage off of the marketplace unless their out of pocket expense exceeds 9.5%.

$2,000 may not seem like a lot of money, but considering this year’s requirement includes companies that have 80 or more employees, the expense can become quite substantial. If you have 80 employees and you’re paying a $2,000 penalty for each one, that’s $160,000 straight from your bottom line.

This is an issue that employers are going to have to be very aware of. Unfortunately it’s causing a real change in the employment patterns in America, as this bill has had many unintended consequences. There are a number of businesses with 80 employees that can’t afford the $160,000 – nor can they afford the insurance. Many are stuck between two impossible decisions.

Get Answers

The tax experts at Baker Retirement & Wealth Management, P.C. can help you understand the Affordable Care Act and how it affects your business. We’ve been serving the greater Evansville area for nearly thirty years. To get answers to your employer penalty questions and others, contact the Baker team today at 1-866-244-3517.

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