The ACA Employer Mandate

The Affordable Care Act's employer mandate — formally known as the Employer Shared Responsibility Provision — requires applicable large employers (ALEs) to offer affordable, minimum-value health coverage to their full-time employees and their dependents, or face potential penalties.

An applicable large employer is defined as a business with 50 or more full-time equivalent employees (FTEs) in the prior calendar year. Businesses with fewer than 50 FTEs are not subject to the employer mandate, though they may still be subject to other ACA requirements.

Who Is a Full-Time Employee Under the ACA?

Under the ACA, a full-time employee is one who works an average of 30 or more hours per week (or 130 hours per month). Calculating FTEs requires combining the hours of part-time employees: add up all part-time hours for the month and divide by 120 to get the FTE count for part-time workers, then add that to your full-time headcount.

What Does "Affordable" Mean?

For 2025, employer-sponsored coverage is considered affordable if the employee's required contribution for employee-only coverage does not exceed 9.02% of the employee's household income. Because employers typically don't know employees' household incomes, the IRS provides three safe harbors for determining affordability:

  • W-2 Safe Harbor: The premium does not exceed 9.02% of the employee's W-2 wages
  • Rate of Pay Safe Harbor: The premium does not exceed 9.02% of the employee's hourly rate × 130 hours
  • Federal Poverty Line Safe Harbor: The premium does not exceed 9.02% of the federal poverty line for a single individual

What Does "Minimum Value" Mean?

A health plan provides minimum value if it covers at least 60% of the total allowed cost of benefits (i.e., the plan's actuarial value is at least 60%). Most standard group health plans offered through the Massachusetts Health Connector meet the minimum value requirement.

ACA Reporting Requirements (Forms 1094-C and 1095-C)

ALEs must file annual reports with the IRS and provide statements to employees documenting the health coverage offered:

  • Form 1095-C: Provided to each full-time employee by January 31 of the following year, documenting the coverage offered and the employee's share of the premium
  • Form 1094-C: The transmittal form filed with the IRS along with all 1095-C forms, due by February 28 (paper) or March 31 (electronic)

Massachusetts-Specific Requirements

Massachusetts has its own health insurance requirements that predate the ACA. The state's employer mandate requires businesses with 11 or more full-time equivalent employees to make a "fair and reasonable" contribution to employee health insurance or pay a Fair Share Contribution assessment. Massachusetts also requires employers to offer a Section 125 plan to employees if they contribute to health insurance premiums.

How MedHealth Helps with Compliance

Staying compliant with both federal ACA requirements and Massachusetts state requirements can be complex. MedHealth Insurance Agency helps businesses understand their obligations, structure their benefits to meet affordability and minimum value standards, and maintain the documentation needed for ACA reporting. Our service is completely free to your business — contact us to schedule a compliance review.