What is Employer Shared Responsibility?
Certain employers (called applicable large employers or ALEs) must either offer minimum essential coverage that is “affordable” and that provides “minimum value” to their full-time employees (and their dependents), or potentially make an employer shared responsibility payment to the IRS. (https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions)
What qualifies as an 'applicable large employer' or ALE?
To be an ALE for a particular calendar year, an employer must have had an average of at least 50 full-time employees (including full-time-equivalent employees) during the preceding calendar year. (https://www.irs.gov/affordable-care-act/employers/determining-if-an-employer-is-an-applicable-large-employer)
Why does this matter?
Coverage is generally 'affordable' for plan years beginning in 2022 if an employee's required contribution for self-only coverage does not exceed 9.61% of his or her household income for the taxable year (decreased from 9.83% for 2021). For plan years beginning in 2023, this percentage significantly decreases to 9.12%. This is the most substantial decrease in this percentage since these rules were implemented, and is the lowest that this percentage has ever been set, at 0.38% below the statutory affordability percentage of 9.5%. As a result, many employers may have to significantly lower the amount they require employees to contribute for 2023 to meet the adjusted percentage.
For more information on employer shared responsibilities, visit https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act