Employer Mandate Penalty Calculation Examples

If a company does not meet the employer mandate requirements, including offering eligible employees Minimum Essential Coverage and Minimum Value Coverage, they will be subject to penalties. For an idea of how employer mandate penalties are calculated, see the examples below.

Example 1

Company X had 150 full-time employees. They offered Minimum Essential Coverage (MEC) to 100 full-time employees. Of the 50 full-time employees who were not offered MEC, 40 employees purchased insurance in the individual marketplace, and at least one of those employees received a tax credit.

  • Minimum Essential Coverage (MEC) Penalty: Company X only offered Minimum Essential Coverage to 100/150 full-time employees, or 66%. They did not meet the 95% threshold.
    • Because 40 full-time employees purchased insurance in the marketplace, and at least one received a tax credit, the Minimum Essential Coverage penalty is triggered.
      • ($2500/ 12 months) * [(150 - 30)] = $25,000  per month
        • This number assumes that at least one employee received tax credit for the entire calendar year.
  • Affordable Minimum Value Coverage (AMVC) Penalty: Because Company X did not pass the Minimum Essential Coverage test, triggering the Minimum Essential Coverage penalty, there is no need to look at whether the Affordable Minimum Value Coverage penalty applies.
    • Minimum Essential Coverage is a lower threshold than Affordable Minimum Value Coverage, so if Minimum Essential Coverage is not met, Affordable Minimum Value Coverage is necessarily not met. Only the Minimum Essential Coverage penalty would be applied in such a scenario.

Example 2

Company Y had 150 full-time employees. They offered MEC to 148 FT employees. All 2 of the FT employees who were not offered MEC purchased marketplace insurance and received tax credits.

  • Minimum Essential Coverage (MEC) Penalty: Company Y offered Minimum Essential Coverage to 148/150 full-time employees, or 98. 6 %. They met the 95% threshold. This penalty does not apply.
  • Affordable Minimum Value Coverage (AMVC) Penalty: Because Company Y passed the Minimum Essential Coverage test and did not trigger Minimum Essential Coverage penalties, we can now check to see if the Affordable Minimum Value Coverage penalty applies.
    • Company Y did not offer Affordable Minimum Value Coverage to all full-time employees, and because all 2 of these full-time employees purchased marketplace insurance and received tax credits, the Affordable Minimum Value Coverage penalty is triggered.
      • ($3750 / 12 months) * (2) = $625  per month
        • This number assumes that all 2 employees received tax credit for the entire calendar year.

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