Isabella Carter
The Affordable Care Act (ACA) was introduced to make health insurance more accessible to Americans. Under the ACA, certain employers are required to offer health coverage that is affordable and provides minimum value to their full-time employees. This is known as the employer mandate. Employers with 50 or more full-time employees must offer affordable coverage to their full-time employees and their dependents or face penalties. An offer of coverage is made when an employer provides an employee with an effective opportunity to enroll in coverage (or decline it) at least once per plan year.
| Characteristics | Values |
|---|---|
| Employers must offer health insurance that is affordable | Coverage is considered "affordable" if employee contributions for employee-only coverage do not exceed a certain percentage of an employee's household income (8.39% in 2024 and 9.02% in 2025) |
| Employers must offer health insurance that provides minimum value | Employers must offer at least one plan that provides "minimum value" (pays at least 60% of the cost of covered services) |
| Employers must offer health insurance to a certain percentage of full-time employees | Employers must offer health insurance to at least 95% of full-time employees and their children up to the end of the month in which they turn 26 |
| Employers must not impose enrollment waiting periods that exceed 90 days | Coverage must begin no later than the 91st day after the hire date |
| Employers must provide an effective opportunity to enroll in coverage or decline it | An ALE makes an offer of coverage to an employee if it provides the employee an effective opportunity to enroll in the coverage (or to decline that coverage) at least once for each plan year |
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What You'll Learn
- Employers must offer affordable, minimum-value health insurance to 95% of full-time employees and their children up to age 26
- Employers must provide an effective opportunity for employees to enrol in coverage at least once per plan year
- Employees working only abroad are generally not considered for determining whether an employer is liable to offer coverage
- Applicable Large Employers (ALEs) must report to the IRS whether they offered health coverage to their employees
- Employees can qualify for ACA marketplace subsidies if their employer-sponsored coverage is deemed unaffordable or of insufficient value
Employers must offer affordable, minimum-value health insurance to 95% of full-time employees and their children up to age 26
Under the Affordable Care Act (ACA), employers with 50 or more full-time employees (or full-time equivalents) are required to offer affordable, minimum-value health insurance to their full-time employees and their children up to the age of 26. This mandate, also known as the employer mandate, aims to make health insurance more accessible to Americans.
To be considered "affordable," the employee's contribution for health insurance coverage must not exceed a certain percentage of their household income. This threshold is indexed annually and was 8.39% in 2024 and 9.02% in 2025. If an employee's required contribution exceeds this threshold, the employer may be subject to the 4980H(b) penalty.
The ACA defines "minimum value" coverage as a plan that pays at least 60% of the cost of covered services. Employers must ensure that at least one of their offered plans meets this minimum value threshold. Failure to do so can result in penalties, such as the $3,860 penalty per full-time employee receiving a federal subsidy for coverage purchased on the Marketplace.
It is important to note that the ACA's definition of a "full-time employee" includes those who work 30 or more hours per week. Additionally, "dependents" covered under the ACA include children up to age 26, excluding stepchildren and foster children. Spouses are not considered dependents, so employers are not required to offer them coverage.
To comply with the ACA, employers must provide their employees with an effective opportunity to enrol in the coverage (or decline it) at least once per plan year. This offer of coverage must be reported to the Internal Revenue Service (IRS) using specific forms, such as Form 1095-C. By adhering to these guidelines, employers can avoid penalties and ensure that their workforce has access to essential health insurance coverage.
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Employers must provide an effective opportunity for employees to enrol in coverage at least once per plan year
Under the Affordable Care Act (ACA), employers must provide their employees with an effective opportunity to enrol in coverage at least once per plan year. This means that employers must offer their employees the chance to enrol in health insurance that is affordable and provides minimum value. This mandate applies to employers with 50 or more full-time employees, with full-time employees working 30 or more hours per week.
The ACA's employer mandate is designed to make health insurance more accessible to Americans. Employers must offer at least one medical plan option that meets the affordability and minimum value requirements. Coverage is considered "affordable" if employee contributions for employee-only coverage do not exceed a certain percentage of an employee's household income. For 2024, this threshold is 8.39%, and for 2025, it is expected to be 9.02%. In addition, employers must ensure that the cost of self-only coverage is less than the indexed percentage of the employee's W-2 wages or monthly wages.
If an employer does not offer coverage or fails to meet the affordability and minimum value requirements, they may be subject to penalties. These penalties are outlined in Section 4980H of the Internal Revenue Code and include a payment to the IRS if a full-time employee receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace. The penalty amount for 2023 was $4,320 annually per affected full-time employee, and for 2024, it increased to $4,460 annually.
To ensure compliance, employers are required to report to the IRS information about whether they offered health coverage to their employees and the details of the coverage offered. This information must also be provided to employees. By following these guidelines, employers can avoid penalties and ensure that their employees have access to affordable and comprehensive health insurance options.
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Employees working only abroad are generally not considered for determining whether an employer is liable to offer coverage
The Affordable Care Act (ACA) imposes certain requirements on employers with regard to providing health insurance coverage to their employees. Under the ACA, certain employers (referred to as applicable large employers or ALEs) must offer health coverage that is "affordable" and provides "minimum essential coverage" to their full-time employees and their dependents. However, the determination of whether an employer qualifies as an ALE and is therefore subject to these requirements, generally does not take into account employees who work solely outside of the United States.
The ACA's employer shared responsibility provisions, outlined in Section 4980H of the Internal Revenue Code, mandate that ALEs offer health coverage to their full-time employees (defined as those working 30 or more hours per week) and their dependents up to the age of 26. If an ALE fails to do so, it may be subject to penalties if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace.
In the context of global employers, the determination of whether an employer qualifies as an ALE generally excludes employees who work only abroad. This exclusion is based on the source of compensation for hours of service. If the compensation for an employee's hours of service constitutes income from sources outside the United States, those hours are typically not considered when determining the employer's status as an ALE. As a result, employees working solely abroad are generally not factored into the calculation of whether an employer is considered an ALE and, consequently, whether the employer is liable to offer health coverage under the ACA.
It is important to note that this exclusion primarily concerns the determination of ALE status and does not necessarily exempt global employers from their obligations to provide health coverage to their employees working abroad. Employers with employees working both domestically and abroad need to analyze the number of hours worked and the source of income for each hour of service to ascertain their compliance obligations under the ACA. While employees working solely abroad are generally not considered for determining ALE status, employers should carefully assess their specific circumstances and seek legal advice to ensure they are meeting their obligations under the ACA.
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Applicable Large Employers (ALEs) must report to the IRS whether they offered health coverage to their employees
Under the Affordable Care Act (ACA), Applicable Large Employers (ALEs) are required to report to the Internal Revenue Service (IRS) whether they offered health coverage to their employees. This is outlined in the employer shared responsibility provisions, which were added to the Internal Revenue Code under section 4980H by the ACA. ALEs must also provide a copy of this information to their employees.
ALEs are defined as employers with 50 or more full-time employees, and/or full-time equivalents (FTEs). Employees who work 30 or more hours per week are considered full-time. ALEs must offer qualifying health coverage to their full-time employees and their dependents, or they may be subject to penalties. This includes offering coverage to the full-time employees' children up to the end of the month in which they turn 26.
To meet the requirements, ALEs must offer health coverage that is "affordable" and provides "minimum value". Affordability is determined by a percentage of the employee's household income. For instance, in 2024, coverage is considered "affordable" if employee contributions for employee-only coverage do not exceed 8.39% of an employee's household income. If an employee's required contribution exceeds the IRS affordability threshold, the employer may face a penalty.
ALEs must provide their employees with an effective opportunity to enrol in the coverage (or to decline that coverage) at least once for each plan year. This is known as the employer mandate. If an ALE fails to offer reasonable coverage that meets minimum value standards, they may be liable for an assessable payment if a full-time employee receives a premium tax credit for coverage in the Marketplace.
The reporting requirements include furnishing statements to individuals and filing information returns with the IRS. The specific forms that employers must use to meet these reporting requirements are Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.
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Employees can qualify for ACA marketplace subsidies if their employer-sponsored coverage is deemed unaffordable or of insufficient value
Under the Affordable Care Act (ACA), employers with 50 or more full-time employees (or their equivalent) must provide affordable, minimum-value health insurance to at least 95% of their full-time employees and their children up to the age of 26. This is known as the employer mandate. Failure to do so may result in financial penalties if any full-time employees purchase coverage on the ACA Marketplace and receive a federal premium subsidy.
The ACA defines affordable coverage as employee contributions for employee-only coverage not exceeding a certain percentage of an employee's household income. This percentage changes annually; it was 8.39% in 2024 and 9.02% in 2025. If an employee's share of premiums exceeds this percentage, the employer-sponsored plan is considered unaffordable.
In such cases, employees may qualify for ACA Marketplace subsidies. For instance, if an employer requires an employee to pay more than 9.83% of their household income for the company's health plan premium, the employee may be eligible for financial assistance on the ACA Marketplace. This affordability threshold is based solely on the cost of self-only coverage and does not include dependents.
The ACA's employer mandate aims to ensure that employees have access to affordable health coverage. However, it is important to note that some families may prefer to remain on the same employer plan even if premium subsidies are available on the ACA Marketplace. This decision often involves considering total costs of care, provider networks, and the potential need to contribute to two separate health plans and out-of-pocket maximums.
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Frequently asked questions
ACA stands for the Affordable Care Act.
The employer mandate requires Applicable Large Employers (ALEs) with 50 or more full-time employees to offer affordable, minimum essential coverage to their full-time employees and their dependents.
An offer of coverage under the ACA means providing an effective opportunity for employees to enroll in or decline coverage at least once per plan year. Coverage is considered affordable if employee contributions for self-only coverage do not exceed a certain percentage of an employee's household income.
If an ALE does not offer coverage or does not meet the affordability and minimum value requirements, they may be subject to penalties if a full-time employee purchases coverage on the Marketplace and receives a federal premium subsidy. The penalty amount varies but can be significant and increases annually.
Employers can avoid penalties by offering affordable, minimum essential coverage to at least 95% of their full-time employees and their dependents. They should also ensure that enrollment waiting periods do not exceed 90 days and that coverage begins no later than the 91st day after the hire date.
