T he Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) expanded insurance coverage in the United States through its "shared responsibility" provisions: Employers either provide health coverage or face potential employer tax penalties; likewise, individuals purchase health coverage or face potential individual tax penalties. The ACA does not require employers to provide health coverage, but it does impose employer penalties in the form of a monthly tax on employers that do not provide adequate and affordable health coverage to certain employees. This is known as the employer "shared responsibility" provision. Since 2015, employers with at least 50 full-time equivalent (FTE) employees are subject to the employer shared responsibility provisions under Section 4908H of the Internal Revenue Code (IRC) as amended by the ACA. However, in 2015, employers with between 50 and 100 FTE employees were eligible for transition relief if certain criteria were met. (For details, see " Implementation and Transition Relief " below.) This report describes the potential employer penalties as well as regulations to implement the ACA employer provisions. The regulations address insurance coverage requirements, methodologies for determining whether a worker is considered full time, provisions relating to seasonal workers and corporate franchises, and other reporting requirements. For an economic analysis of the employer penalty and policy options to modify the penalty, see CRS Report R43181, The Affordable Care Act and Small Business: Economic Issues , by [author name scrubbed] and [author name scrubbed]. The ACA employer shared responsibility provisions apply to all common law employers, including government entities (such as federal, state, local, or Indian tribal government entities) and nonprofit organizations that are exempt from federal income taxes. The potential employer penalty does not explicitly require that employers offer their employees acceptable health coverage. However, it does impose penalties on certain firms with at least 50 FTE employees if one or more of their full-time employees obtains a premium tax credit through the newly established health insurance exchanges. An individual may be eligible for a premium tax credit if his or her income is between certain thresholds and the individual's employer does not offer health coverage or offers insurance that is "not affordable" or does not provide "minimum value," as defined by the ACA. As shown in Figure 1 , determining the potential exposure to the employer penalty is a multi-stage process. First, the firm must be a large employer with at least 50 FTEs to be potentially subject to the penalty. Second, only workers who are considered to be full-time (generally, averaging 30 hours or more per week) may trigger the penalty. Third, the actual calculation of the penalty will depend upon whether the employer currently provides health coverage to its full-time employees, if the coverage is considered adequate and affordable as defined by the ACA, and the number of full-time employees. Only large employers may be subject to penalties regarding employer-sponsored health insurance. The ACA defines a large employer as one who employed an average of at least 50 FTEs on business days during the preceding calendar year. As depicted in Figure 1 , to determine whether an employer is a large employer, the hours worked by both full-time and part-time employees must be calculated. Full-time is defined as having worked on average at least 30 hours per week. Hours worked by part-time employees (i.e., those working less than 30 hours per week) are converted into FTEs and are included in the calculation. In general, hours worked by seasonal employees are also included in this calculation. Overall hours worked by part-time employees during a month are added up, and the total is divided by 120 and added to the number of full-time employees to get the number of FTE workers. This calculation determines only whether an employer is considered large for purposes of potentially being subject to a penalty. The actual penalty is applicable solely to health coverage status of full-time workers and is discussed in the " How to Determine an Employee's Full-Time Status " section of this report. The process to determine the underlying employer may be a complicated determination. Owners or part-owners in multiple businesses must follow Internal Revenue Service (IRS) aggregation rules. Firms that use independent contractors must follow IRS rules for determining whether the contractor is an employee. Firms that contract with a temporary staffing agency must determine which entity is the employer (i.e., the firm or the staffing agency) for ACA purposes. Finally, businesses that hire seasonal workers have special rules on how to count hours worked by seasonal employees. The ACA large-employer calculation requires that an employer of multiple entities (such as a franchise owner with several restaurants) must follow the IRS aggregation rules governing controlled groups . Specifically, if one individual or entity owns (or has a substantial ownership interest in) several franchises, all those franchises are essentially considered one entity. In this case, for purposes of the 50-FTE rule, the employees in each of the franchises must be added together to determine the number of FTEs. The ACA definition of an employer is based on the common law standard in which a worker is considered to be an employee if the worker is subject to the will and control of the employer not only as to what shall be done but how it shall be done. The potential employer penalty applies to all common law employers, including government entities (such as federal, state, local, or Indian tribal government entities) and nonprofit organizations that are exempt from federal income taxes. An independent contractor is a worker who controls what will be done and how it will be done and for whom the contract dictates the desired result of the work. The IRS provides further guidance on the distinction between employees and independent contractors. An independent contractor would not be considered an employee for the purposes of the employer penalty calculation. In general, the employer of a temporary agency worker is the employing agency rather than the firm that has contracted with the agency to provide workers on a temporary basis. Hours worked by individuals receiving care under the TRICARE program, or individuals enrolled and receiving coverage through certain Department of Veterans Affairs health care programs, are excluded from calculations to determine if an employer is large. When determining whether a firm meets the ACA definition of an applicable large employer, the hours worked by seasonal employees may be treated differently if (1) an employer would be considered a large employer for fewer than 120 days, and (2) for those days the hours worked by seasonal employees are what push the employer's FTE calculation above 50 FTEs. If these two conditions are met, the employer may exclude the hours worked by seasonal employees and thus would not be considered a large employer. Otherwise, all hours by all employees (including seasonal workers) are applied to determine large-employer status. Regardless of whether a large employer offers coverage, it will be potentially liable for a shared responsibility tax (penalty) only if at least one of its full-time employees obtains coverage through an exchange and receives a premium tax credit. For purposes of determining the penalty, a full-time employee includes only those individuals working on average 30 hours or more per week. As shown in Figure 1 , part-time workers are not included in the penalty calculations (even though they are included in the determination of a "large employer"). An employer will not pay a penalty for any part-time worker even if that part-time employee receives a premium credit. As discussed under implementation issues below, employers are not likely to pay a penalty based upon seasonal workers receiving a premium credit if they work less than 30 hours on average over a pre-specified time period (up to 12 months). A large employer that does not offer health coverage will be subject to the ACA employer penalty only if any of its full-time employees obtain coverage through an exchange and receive a premium tax credit. In 2016, the monthly penalty assessed to an employer that does not offer coverage is equal to the number of its full-time employees minus 30 multiplied by one-twelfth of $2,160 for any applicable month. That penalty is indexed by a premium adjustment percentage for each calendar year. Large employers that offer health coverage may face a penalty if the employer's coverage fails to meet one of two criteria: 1. Affordability—The individual's required contribution toward the plan premium for self-only coverage cannot exceed 9.66% of his/her household income in 2016. 2. Adequacy—The health plan must pay for at least 60%, on average, of covered health care expenses to be considered adequate. Employers that offer unaffordable or inadequate health insurance coverage do not meet the employer requirements if at least one full-time employee declines the coverage and obtains a premium credit in an exchange plan. The penalty amounts are indexed by a premium adjustment percentage for each subsequent calendar year. In 2016, the penalty payment amount is the lesser of the number of full-time employees who receive a premium credit multiplied by one-twelfth of $3,240 for any applicable month, or the total number of the firm's full-time employees minus 30, multiplied by one-twelfth of $2,160 for any applicable month. As discussed above, the total ACA employer penalty is based on the number of full-time employees. The ACA specified that working 30 hours or more per week is considered full-time. However, the statute did not specify what time period (i.e., monthly or annually) employers would use to determine if a worker is full-time. The ACA directed the Department of Health and Human Services and the Department of Labor to provide regulatory guidance to employers for determining their employees' full-time status. As a result, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week, and this 130 hours of service monthly equivalency applies for both the look-back measurement method and the monthly measurement method for determining full-time employee status.