Definitions of Large Employer Excise Tax
Month of Coverage
Means the employee was covered for every day of the month
Retirees
A retiree (meaning an individual who was not an employee during the applicable period) is not a full-time employee. However, if the retiree was a full-time employee for any month of the calendar year (for example, before retiring mid-year), the employer must complete information in Part II of Form 1095-C for all twelve months of the calendar year, using the appropriate codes.
Minimum Value
A plan provides minimum value if the plan pays at least 60 percent of the costs of benefits for a standard population and provides substantial coverage of inpatient hospitalization services and physician services. Report on Form 1095-C as not providing minimum value if a plan fails to provide substantial coverage of inpatient hospitalization and physician services.
Offer of Health Coverage – Employee
An employer makes an offer of coverage to an employee if:
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It provides the employee an effective opportunity to enroll in the health coverage (or to decline that coverage) at least once for each plan year.
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It continues the employee’s election of coverage from a prior year but provides the employee an effective opportunity to opt out of the health coverage. See insurance opt-out arrangements below.
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The employer provides health coverage to an employee but does not provide the employee an effective opportunity to decline the coverage, the employer is treated as having made an offer of health coverage to the employee only if that health coverage provides minimum value and does not require an employee contribution for the coverage for any calendar month of more than 9.12% (2023) of a monthly amount determined as the mainland federal poverty line for a single individual for the applicable calendar year, divided by 12.
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It, or another employer in the Aggregated ALE Group, or a third party such as a multiemployer or single employer Taft-Hartley plan, a multiple employer welfare arrangement (MEWA), or, in certain cases, a staffing firm, offers health coverage on behalf of the employer.
Offer of Health Coverage – Spouse
For purposes of reporting, an offer to a spouse includes an offer to a spouse that is subject to a reasonable, objective condition, regardless of whether the spouse meets the reasonable, objective condition. For example, an offer of coverage that is available to a spouse only if the spouse certifies that the spouse does not have access to health coverage from another employer is treated as an offer of coverage to the spouse for reporting purposes. Note that this treatment is for reporting purposes only, and generally will not affect the spouse’s eligibility for the premium tax credit if the spouse did not meet the condition and therefore did not have an actual offer of coverage.
Insurance Opt-Out Arrangements
Employers occasionally provide their employees with opt-out programs. An opt-out payment is a payment that:
(1) is available only if the employee declines coverage (which includes waiving coverage in which the employee would otherwise be enrolled) under the employer-sponsored plan, and
(2) cannot be used to pay for coverage under the employer-sponsored plan.
Prop Reg 1.36B-2(c)(3)(v)(A)(7) defines an "eligible opt-out arrangement" as an arrangement under which the employee’s right to receive the opt-out payment is conditional. However, the final regulations show “reserved” for opt-out arrangements at 1.36B-2(c)(3)(v)(A)(7).
Limited Non-Assessment Period
The term limited non-assessment period refers to a period of time at the employee’s beginning of employment where an employer will not be assessed the penalty. An example would be the employee’s probationary period at the beginning of employment.
An ALE will not be subject to an assessable payment under section 4980H(a), and in certain cases section 4980H(b), for a full-time employee during limited non-assessment periods. The first five periods described below are Limited Non-Assessment Periods only if the employee is offered health coverage by the first day of the first month following the end of the period and are Limited Non-Assessment Periods for section 4980H(b) only if the health coverage that is offered at the end of the period provides minimum value (Reg Sec 54.4980H-1(a)(26)).
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First Year as ALE Period: ,January through March of the first calendar year in which an employer is an ALE, but only for an employee who was not offered health coverage by the employer at any point during the prior calendar year. For example, 2023 is not the first year an employer is an ALE, if that employer was an ALE in 2022.
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Waiting Period under the Monthly Measurement Method: If an employer is using the monthly measurement method to determine whether an employee is a full-time employee, the period beginning with the first full calendar month in which the employee is first otherwise (but for completion of the waiting period) eligible for an offer of health coverage and ending no later than two full calendar months after the end of that first calendar month.
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Waiting Period under the Look-Back Measurement Method: If an employer is using the look-back measurement method to determine whether an employee is a full-time employee and the employee is reasonably expected to be a full-time employee at his or her start date, the period beginning on the employee’s start date and ending not later than the end of the employee’s third full calendar month of employment.
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Initial Measurement Period and Associated Administrative Period under the Look-Back Measurement Method: If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and the employee is a variable hour employee, seasonal employee or part-time employee, the initial measurement period for that employee and the administrative period immediately following the end of that initial measurement period.
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Period Following Change in Status that Occurs During Initial Measurement Period Under the Look Back Measurement Method: If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and, as of the employee’s start date, the employee is a variable hour employee, seasonal employee or part-time employee, but, during the initial measurement period, the employee has a change in employment status such that, if the employee had begun employment in the new position or status, the employee would have reasonably been expected to be a full-time employee, the period beginning on the date of the employee’s change in employment status and ending not later than the end of the third full calendar month following the change in employment status. If the employee is a fulltime employee based on the initial measurement period and the associated stability period starts sooner than the end of the third full calendar month following the change in employment status, this Limited Non-Assessment Period ends on the day before the first day of that associated stability period.
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First Calendar Month of Employment: If the employee’s first day of employment is a day other than the first day of the calendar month, then the employee’s first calendar month of employment is a Limited Non-Assessment Period.