TurboTax / Tax Calculators & Tips / All Tax Guides / Health Care / What is Employer Sponsored Coverage?

What is Employer Sponsored Coverage?

Updated for Tax Year 2016


OVERVIEW

The term "employer-sponsored coverage" refers to health insurance obtained through an employer -- the most common way Americans get insurance. Employer-sponsored coverage includes not only insurance for current employees and their families, but can also include retired employees. Further, federal law gives former employees the right to stay on their employer's health insurance, at their own expense, for a time after leaving a job. That, too, is employer-sponsored coverage.


Defined as minimum essential coverage

Under the Affordable Care Act, also known as Obamacare, most Americans are required to maintain a basic level of health insurance referred to as minimum essential coverage. Those who do not have this level of coverage may be subject to tax penalties under the law’s "shared responsibility" provisions. According to the Department of Health and Human Services, employer-sponsored coverage provides minimum essential coverage by definition.

what is employer sponsored coverage

Requirements for sponsoring coverage

The Affordable Care Act, also known as Obamacare, requires employers to provide health coverage to their workers if they have at least 50 full-time employees or "full-time equivalents." When two or more part-time employees’ work hours add up to a full-time load (40 hours/week), then those workers represent one full-time equivalent (FTE).

A company with fewer than 50 full-time employees and equivalents is not required to provide coverage, although it may qualify for the Tax Credit for Small Employer Health Insurance Premiums if it chooses to sponsor coverage for its workers.

Failure to provide coverage

Employers that have enough workers to trigger the coverage requirement are referred to as "applicable large employers" or ALEs. The law calls for penalties on applicable large employers that fail to sponsor coverage as required, just as it fines individuals who fail to have basic health coverage.

Like many other elements of the Affordable Care Act, these penalties take effect over time. Only employers with 100 or more full-time employees or equivalents will be subject to the penalty for 2015. For 2016 and beyond, penalties will apply to those with 50 to 99 employees, as well.

Notification requirements

Companies that sponsor coverage for their employees are required to report the cost of that coverage on W-2 forms, the annual wage statements that employees use to file their taxes. Health benefits are not taxed; the Internal Revenue Service (IRS) requires that this information appear on the W-2 just so workers can better understand the value of their coverage.

Starting with the 2015 tax year, people with employer-sponsored coverage should also receive annual statements detailing their coverage. Depending on how a company structures its coverage, employees may receive this information on Form 1095-B, Form 1095-C or may receive both forms.

Visit TurboTax.com/health/ to learn more about the Affordable Care Act and how it may affect your taxes.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99$34.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/1040A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Bonus Offer with TurboTax Self-Employed: File your 2016 federal return with TurboTax Self-Employed by 4/18/17 and receive a complimentary subscription to QuickBooks Self-Employed until 4/30/18 at no additional cost. After you file your taxes, you must activate your QuickBooks Self-Employed subscription by 7/15/2017 by logging into QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/login. Once activated, you will have access to QuickBooks Self-Employed until 4/30/2018.
    Offer valid only for new QuickBooks Self-Employed customers.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not file with TurboTax Self-Employed by 4/30/2018, your QuickBooks Self-Employed subscription will automatically renew on 5/1/2018 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself: In order to pay for the price of TurboTax Self-Employed, you will need at least $600 in deductible business expenses. This calculation is based on the self-employment tax income rate for tax year 2016.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or SmartLook); not included with Federal Free Edition. Feature availability varies by device. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • TurboTax Self-Employed Expense Finder: Available only in TurboTax Self-Employed. Not available for people with certain types of expenses and tax situations including paying contractors or employees, home office or vehicle actuals, inventory, self employed health insurance or retirement, asset depreciation, sale of property or vehicles, and farm income. Some financial institutions limit the timeframe for which historical transactions may be imported by ExpenseFinder. ExpenseFinder expected late January (late February for mobile app).
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected in March. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.