Employee Shared Responsibility Provisions: An Overview

Employee Shared Responsibility Provisions

Employer shared responsibility provision, also known as “the pay or play provision” or “the employer mandate”, came into effect on 1st January, 2015. Under the provision, all Applicable Large Employers (employing 50 or more full time employees), also known as ALEs, are required to either pay their employer shared responsibility (ESR) dues to the IRS, or provide an essential coverage that is “affordable” and offers the “minimum value” applicable, to their full-time employees and their dependents.

Who is an Applicable Large Employer?

Employers are assessed and qualified as an ALE depending on the number of full time employees working for the employer during the previous year. If an employer has an average of 50 or more full time employees during any given year, they are considered as an ALE in the next. If, for instance, an employer has an average of 50 or more full time employees in 2015, will be regarded as an ALE in 2016.

Why Is It Important to Identify Full Time Employees?

Generally, any employee who, on an average, is employed for at least 30 hours of service in a week or 130 hours of service per month is considered as a full time employee. Reasons why it is important to determine full time employees include.

  • To find out whether your company is an ALE.
  • To identify employees eligible for minimum essential coverage and avoid employer shared responsibility payment to the IRS.
  • To determine the amount of employer shared responsibility payment liability that the company owes to the IRS.


Children under the age of 26 are the only qualified dependents for coverage. Kindly note that the child may be placed for adoption or legally adopted. Stepchildren, foster children or for that matter even spouse is not considered as a dependent.

When does an ALE make an ESR Payment?

ALEs are required to offer minimum essential coverage to at least 95 percent of their full time employees. It is important to remember that even if one of the full time employees receives Premium Tax Credit (PTC) through the marketplace for the purchasing coverage, the ALE would owe an ESR payment to the IRS.

A Few Last Words

Employers need to note that shared responsibility provisions in no way stops them from extending the minimum essential coverage beyond their full-time employees. If they want, they may extend the coverage to their part time and contractual employees, too. Should you have any questions regarding Employee Shared Responsibility provisions, feel free to contact our team of experts. We will be happy to assist.

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