Large Employer Excise Tax
Overview
All applicable large employers (ALE) must offer at least 95% of its full-time employees and their dependents (but not spouse) affordable minimum essential health care coverage or be subject to a penalty.
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An applicable large employer is one with 50 or more equivalent full- time employees.
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Even though part-time employees can drive the equivalent full-time employee count above the 50 threshold, the employer need only offer affordable minimum essential coverage to its full-time employees.
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Excise tax (penalty) applies to those applicable large employers (ALEs), that:
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Do not offer coverage for all its full-time employees (and their dependents),
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Offer minimum essential coverage that is unaffordable (employee contribution for 2024 is more than 8.39% down from 9.12% in 2023) of the employee's household income), or
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Offer minimum essential coverage where the plan's share of the total allowed cost of benefits is less than 60% (i.e. less than the bronze coverage)
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Related IRC and IRS Publications and Forms
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1094-C – Transmittal
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1095-B – Insured Statement
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1095-C - Employee Statement
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Code Sec 4980H - Shared responsibility for employers
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Reg §54.4980H-4 - Assessable payments (Sec 4980H(a))
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Form 8928 - Return of Certain Excise Taxes
Acronyms
The following acronyms are used throughout this chapter:
ALE – Applicable Large Employer – those subject to the employee insurance mandate.
FTE – Full-time employees – generally those working 30 hours or more per week.
EFTE – Equivalent full-time employees considering the hours worked by part-time employees.
Small – Refers to employers with fewer than 50 EFTE
Large – Refers to employers with 50 or more EFTE
Penalty – Employer Shared Responsibility Penalty
Caution
Who is an “employee” and who is an “Applicable Large Employer” (ALE) are governed by some very complex and lengthy regulations (Reg. § 54.4980H)? The regulations include an abundant number of special rules. This material covers many of the more common situations but not all. Practitioners providing advice to their clients related to this excise tax are cautioned to review and familiarize themselves with the entire regulation before rendering any services. Full text of the regulations can be accessed in the Federal Register.