3 Things You Need to Know Now About the ACA’s “Play or Pay” Penalties | WorkSmart Systems is a Professional Employer Organization (PEO)


3 Things You Need to Know Now About the ACA’s “Play or Pay” Penalties


Employers nationwide have experienced several challenges since the Affordable Care Act (ACA) was introduced. When the ACA was passed in March 2010, it included an employer shared responsibility provision. This is now known as the “Play or Pay” decision, and is also referred to as the “Employer Mandate.”

This provision applies only to applicable large employers (ALEs) – think 50+ full-time equivalent employees – and went into effect in 2015. These employers are required to report information about the health coverage they offered or did not offer to certain employees.

What does “Play” mean?

To “play” means a company will offer employees health insurance that meets essential health benefit requirements and is affordable to employees by ACA standards.

What does “Pay” mean?

To “pay” means a company chooses to pay a tax penalty rather than offer health insurance that satisfies ACA requirements.

The penalty amounts are adjusted for inflation, and the IRS has issued a notice detailing only the 2015 and 2016 penalty amounts so far. If an ALE fails to offer minimum essential coverage to all full-time employees during 2016, the penalty amounts to $2,160 per full-time employee minus the first 30. If an employer offers minimum essential coverage, but fails to offer minimum value, affordable coverage, the penalty will be the lesser of either $3,240 per full-time employee receiving a federal subsidy for coverage purchased on an exchange, or $2,160 per full-time employee minus the first 30. Penalties are, of course, expected to climb with each passing year.

How are employers affected?

According to a new survey, more than two-thirds of employers are in favor of repealing the ACA’s employer mandate. The cost and administrative burden of showing compliance prompted 84% of respondents to say it has had a significant impact, and 51% described the impact as “very significant.” Under “Play or Pay,” employers have to modify their plans, track worker hours, manage eligibility and report coverage to prove they are doing something that, in most cases, they have been doing all along.

When asked about the impact of the ACA on their organization, 20% of survey respondents said they have experienced higher cost and 29% reported making unwanted plan changes in order to avoid the excise tax liability.

The IRS has prepared information on common questions and answers to help you better understand the basics of the employer shared responsibility provisions.

We’re here to help

It’s important to note that additional ACA regulations will continue to develop until 2018. Clients of WorkSmart Systems already have a partner in taking care of health insurance coverage for their employees and assuring ACA compliance.

If you are interested in a partner who has your back, start a conversation with us. Call us at 317.585.7870 or send an email to solutions@worksmartpeo.com.

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