Effective for 2014, the Affordable Care Act (ACA) provides premium tax credits to eligible individuals who purchase qualified health plan coverage through a health insurance exchange (Exchange). To qualify for the premium tax credit, an individual cannot be eligible for other minimum essential health coverage, including coverage under an employer-sponsored plan that is affordable to the individual and provides minimum value.

A large employer may be liable for a penalty under ACA’s “pay or play” rules if any of its full-time employees receives a premium tax credit through an Exchange. This may happen if a large employer’s plan does not provide minimum value. An employer is a “large employer” for a calendar year if it employed an average of at least 50 full-time employees on business days during the preceding calendar year.

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