United Benefit Advisors Insight and Analysis Blog

Potential Employer Penalties under the Patient Protection and Affordable Care Act

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors
  May 7, 2015 12:00:00 PM

Potential Employer Penalties under PPACAEmployers that do not meet the requirements of the Patient Protection and Affordable Care Act (PPACA) need to be concerned about several potential penalties. Two significant penalties include the excise tax, which can be as much as $100 per affected individual per day, and the penalties that larger employers must pay if they do not meet their employer-shared responsibility/play or pay obligations.

Excise Tax Penalties

The excise tax penalties apply to all plans, regardless of size. Since 2010, the IRS has said that employers and plan administrators should self-report any failure to comply with various group health plan requirements, including requirements related to COBRA, HIPAA, Mental Health Parity, and the comparable contribution requirement for health savings accounts (HSAs), using IRS Form 8928. With the passage of PPACA, numerous additional compliance responsibilities apply. Employers and plan administrators are now expected to self-report these compliance failures, too, using Form 8928. Historically enforcement of the filing requirement and collection of the excise tax has been light, but the IRS is now indicating that it expects employers to report failures and pay fines as applicable.

For a complete list of the potential COBRA, HIPAA and PPACA violations that may result in an excise tax (plus information on how they can be avoided), view UBA”s PPACA Advisor, “Potential Employer Penalties under the Patient protection and Affordable Care Act”.

Employer-Shared Responsibility/Play or Pay Penalties

Large employers will owe penalties if they do not meet the employer-shared responsibility/play or pay requirements. The IRS has recently issued a helpful Q and A that answers many questions about the potential play or pay penalties.

To avoid penalties, beginning in 2015 large employers (generally those with 100 or more full-time or full-time-equivalent employees in their controlled group) must offer health benefits to employees who work an average of 30 or more hours per week, or 130 hours per month. If an employer has a non-calendar year plan and can meet certain transitional rules, it can delay offering health benefits until the start date of its 2015 plan year.

Mid-size employers (those with 50 to 99 full-time or full-time equivalent employees in their controlled group) do not have to meet the play or pay requirements until 2016 as long as they keep their headcount, eligibility requirements, benefit levels, and employer contribution amount or percentage at essentially the same level it was on February 9, 2014. Employers taking advantage of this delay must certify to the IRS that they have met these requirements. Provided they meet certain transitional rules, if an employer has a non-calendar year plan, it may delay meeting the play or pay requirements until the start of its 2016 plan year.

For comprehensive information on how large employers can avoid penalties, plus the difference between the “A” and the “B” penalties, view UBA”s PPACA Advisor, “Potential Employer Penalties under the Patient protection and Affordable Care Act”.

Topics: PPACA Affordable Care Act, Play or Pay, excise tax, employer shared responsibility, IRS Form 8928