Ask a Zenefits Advisor: Does Employer Shared Responsibility Apply to My Employees’ Families?

Benefits Advisor Bud Bowlin clarifies whether the ACA affordable health coverage mandate applies to your employees’ spouses and dependents.

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PEO Considerations

Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to [email protected].

Hello Bud,

I read your article every week and love it. Thanks for sharing your knowledge. Question regarding ACA compliance. I know the healthcare premiums must not exceed 9.5% of employees’ W-2 compensation. Is this 9.5% ONLY for the employee coverage, or is it employee + family coverage? (We pay 100% of employee healthcare premiums. I just wanted to verify.)

Having ACA Regulations Inquiry

Dear H.A.R.I.,

Good question; this comes up a lot. You are correct: the employer mandate to provide health coverage with premiums that do not exceed 9.5% of an employee’s W-2 compensation applies only to your employees, not their families. However, as part of Employer Shared Responsibility, you must offer health coverage to the dependents of your employees.

Here’s how the IRS makes the distinction between what you offer employees and what you offer their dependents:

To avoid a potential Employer Shared Responsibility payment, an applicable large employer must offer health coverage that is affordable and provides minimum value to its full-time employees and must offer health coverage to the dependents of those employees.

So, that’s specifically affordable, minimum value health coverage for your full-time employees and then generally, health coverage for their dependents.

If you’re a large employer (with 50+ employees), here are two related tips:

  • A spouse is not considered a dependent. You won’t be penalized under Employer Shared Responsibility if you don’t offer health coverage to an employee’s spouse. However, if you DO offer health coverage to your employees’ spouses, remember that these benefits apply to all spouses.
  • Dependent children must be covered until they turn 26. This requirement only applies if your health coverage is designed to cover dependents. You may cease to cover dependent children upon their 26th birthdays.

Good job on your ACA knowledge and covering your employees!


Got a question about benefits and insurance?

Send it to [email protected]

The answers on Ask Bud serve as basic guidelines and are for informational purposes only. Bud is a treasure trove of knowledge, but is unable to provide legal, tax, or fact-specific human resources advice. Once a question is submitted, Bud and Zenefits reserve the right to accept, reject, edit, modify, or otherwise change it. All content on the Zenefits website, including questions received and answers provided by Ask Bud, are Zenefits property.

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