Tuesday, December 8, 2015

Employer penalty amounts for 2016 and 2017

The ACA's employer penalty increases every year. It began in 2014 (although not enforced in that year) at $2,000 per full-time employee-year (over 30 employees). Its amounts in subsequent years:

2015 $2,084
2016 $2,166
2017 $2,265

These are set according to the HHS Secretary's "Premium Adjustment Percentage."

As explained in my book, the employer penalty has a special business tax treatment that makes it more expensive than employee salaries. The salary equivalent of the employer penalties are:

2014 $3,046
2015 $3,174
2016 $3,299
2017 $3,449

After increasing 4 percent in each of the first two years, the lasted annual increase is 5 percent.

Another interesting way to look at it is the number of hours that a $7.25/hour worker has to work to create enough value for his employer to pay the penalty on his behalf (let alone pay the employee's wages):

2014 8.1 hours per week, 52 weeks per year
2015 8.4 hours per week, 52 weeks per year
2016 8.8 hours per week, 52 weeks per year
2017 9.1 hours per week, 52 weeks per year

In other words, only after the ninth hour of work in 2017 will the penalty be paid and there will be value creation that can go toward employee wages, employer profits, or other taxes.

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