New York does not have a state law that forces employers to provide health insurance. The New York employer health insurance requirements that do apply come from the federal Affordable Care Act, and they only kick in once a business employs an average of 50 or more full-time employees (counting full-time equivalents) in the prior calendar year. Smaller employers can offer coverage voluntarily, but no penalty attaches if they don’t. Separate New York rules on disability benefits, Paid Family Leave, and continuation coverage apply to virtually every employer starting at one employee, and those obligations exist whether or not you offer a health plan.
Who Has to Offer Coverage
The ACA’s employer shared responsibility provision divides businesses into two groups. If your company is an Applicable Large Employer (ALE), you must offer health coverage that meets federal standards or risk an IRS penalty. If you’re not an ALE, the mandate simply doesn’t reach you.1Internal Revenue Service. Employer Shared Responsibility Provisions
An ALE is a business that employed an average of at least 50 full-time employees, including full-time equivalents, during the previous calendar year. The IRS redoes this calculation every year, so a company can move in and out of ALE status as its workforce changes.2Internal Revenue Service. Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act
How to Count Your Workforce
The ACA defines a full-time employee as someone who works an average of at least 30 hours per week or 130 hours per month. Each of those workers counts as one toward the 50-employee line.3Internal Revenue Service. Identifying Full-Time Employees
Part-time employees don’t count individually. Their hours convert into full-time equivalents. For each month, total the hours worked by all part-timers (capping any single person at 120 hours), then divide by 120. That’s your FTE count for the month. Add FTEs to your actual full-time headcount, average the result across the year, and if you land at 50 or more, you’re an ALE for the following year.
Seasonal Worker Exception
If your workforce only exceeded 50 full-time employees (including FTEs) for 120 days or fewer during the year, and the workers who pushed you over the line were seasonal, the IRS does not treat you as an ALE. This matters for agriculture, holiday retail, and tourism-heavy operations.
What the Plan Has to Look Like
Offering any plan is not enough. An ALE’s coverage must clear two federal tests.
Minimum Value
A plan provides minimum value if it’s designed to cover at least 60% of the total expected cost of covered medical services, including physician visits and inpatient hospital care.4Internal Revenue Service. Minimum Value and Affordability Bare-bones catastrophic coverage will not qualify.
Affordability
For plan years beginning in 2026, the employee’s share of the monthly premium for the employer’s lowest-cost self-only plan cannot exceed 9.96% of the employee’s household income.5Internal Revenue Service. Revenue Procedure 2025-25 That’s up from 9.02% for 2025.
Since employers usually don’t know what an employee earns from all sources, the IRS provides safe harbors. The most-used one is the Federal Poverty Line safe harbor. For plan years starting in the first half of 2026, a plan is treated as affordable if the employee’s self-only monthly premium contribution is no more than $129.90. Set contributions at or below that amount and you’re protected from the affordability penalty even if a particular employee’s household income would technically make the plan unaffordable.
Penalties for Falling Short
ALEs that miss the mark face one of two penalties under Internal Revenue Code Section 4980H. The IRS adjusts the dollar amounts every year, and 2026 figures are meaningfully higher than in recent years.6Internal Revenue Service. Revenue Procedure 2025-26
Failing to Offer Coverage
If an ALE doesn’t offer minimum essential coverage to at least 95% of its full-time employees and their dependents, and even one full-time employee then gets a premium tax credit through the Marketplace, the employer owes $3,340 per year for each full-time employee.7Office of the Law Revision Counsel. 26 USC 4980H – Shared Responsibility for Employers Regarding Health Coverage The first 30 full-time employees drop out of the calculation. A 55-employee ALE that failed to offer coverage would owe the penalty on 25 workers, not 55.
The 95% rule allows a small margin. You must offer coverage to all but 5% of your full-time workforce, or all but 5 employees, whichever is greater.8Federal Register. Shared Responsibility for Employers Regarding Health Coverage
Offering Inadequate Coverage
If you do offer coverage but it fails either the minimum value or affordability test, a second penalty applies. It hits only for each full-time employee who declines your plan and enrolls in a Marketplace plan with a premium tax credit. For 2026, that penalty is $5,010 per year for each such employee.6Internal Revenue Service. Revenue Procedure 2025-26
The two penalties don’t stack. The IRS assesses whichever amount is larger.
How the IRS Enforces
Penalties arrive as a Letter 226-J, a proposed assessment listing the specific employees and months that triggered the charge. The letter includes a response form and a deadline. You can dispute the assessment, correct the information, or ask for more time by contacting the IRS using the details in the letter.9Internal Revenue Service. Understanding Your Letter 226-J Careful, documented responses at this stage change outcomes.
Reporting Obligations
ALEs report to both employees and the IRS every year. Two forms carry the load. Form 1095-C goes to each employee who was full-time during any month of the year. Form 1094-C is a transmittal that summarizes the employer’s overall coverage offers and travels to the IRS with copies of every 1095-C.
For 2025 coverage, employers have two ways to get Form 1095-C to employees: mail or deliver it by March 2, 2026, or post a website notice by March 2, 2026 telling employees the form is available on request (with a 30-day turnaround once requested). Electronic filing with the IRS is due by March 31, 2026. Employers filing 10 or more forms must file electronically.
If You’re a Small Employer
Under 50 FTEs, you have no federal obligation to provide health coverage. Many small employers offer it anyway for hiring and retention. New York’s small group insurance market covers businesses with 1 to 100 employees, and insurers must offer coverage on a community-rated basis, meaning they can’t charge more or deny coverage because of employees’ health conditions.10New York Department of Financial Services. FAQs For Small Group Expansion to 1-100 Employees
Small businesses can buy group plans through the NY State of Health Small Business Marketplace (SHOP) or directly through an insurer or broker. SHOP enrollment is the gateway to the one meaningful federal incentive: the Small Business Health Care Tax Credit.
Small Business Health Care Tax Credit
To qualify, a business must meet all of these conditions:11Internal Revenue Service. Small Business Health Care Tax Credit and the SHOP Marketplace
- Fewer than 25 full-time equivalent employees, calculated by dividing total annual hours by 2,080 (a different formula than the ALE test).
- Average annual wages below an inflation-adjusted threshold, which was $62,000 for tax year 2023 and is updated by the IRS each year.
- Employer pays at least half of each employee’s individual premium cost.
- The plan is purchased through SHOP.
The maximum credit covers 50% of the employer’s premium contributions for for-profit businesses and 35% for tax-exempt organizations. It’s worth the most for employers with 10 or fewer FTEs and average wages below about $32,000, and it phases out as headcount and wages climb toward the upper limits.12HealthCare.gov. The Small Business Health Care Tax Credit
Rules That Apply to Every New York Employer
Even if you’re too small for the ACA mandate, New York imposes obligations that start at one employee. If you assume “no health insurance requirement” means “no coverage obligations,” you’ll miss these.
Continuation Coverage After Separation
Federal COBRA gives workers at companies with 20 or more employees the right to continue their group coverage for up to 18 months (longer in some cases). New York goes further: state law requires continuation coverage to last up to 36 months from the date coverage would otherwise end, regardless of employer size.13New York Department of Financial Services. State Continuation Coverage Extension to 36 Months
Employees at large companies who exhaust their 18 months of federal COBRA get the remainder of the 36 months from New York. Employees at businesses with fewer than 20 workers, who aren’t covered by federal COBRA at all, get the full 36 months directly under state law.14New York State Senate. New York Insurance Law ISC 3221 This applies to fully insured group plans subject to New York law and does not reach self-funded plans. Employers don’t pay for the continuation coverage, but they must notify departing employees of the right and coordinate with the insurer.
Statutory Disability Benefits
New York’s Disability Benefits Law requires nearly all private employers to provide short-term disability coverage for off-the-job injuries and illnesses. Benefits pay 50% of an employee’s average weekly wage, capped at $170 per week, for up to 26 weeks within any 52-week period.15New York State Workers’ Compensation Board. Introduction to the Disability Benefits Law
You can fund the coverage through a disability benefits insurance policy or by self-insuring. Employers can pass along a small share of the cost through payroll deductions of up to 0.5% of wages, capped at 60 cents per week.16New York State Workers’ Compensation Board. Disability and Paid Family Leave Benefits Coverage Requirements
Paid Family Leave
New York’s Paid Family Leave program provides job-protected, paid time off for bonding with a new child, caring for a family member with a serious health condition, or handling certain needs tied to a family member’s military deployment. Most private employers with one or more employees must carry the coverage.17Paid Family Leave. Employers
For 2026, eligible employees can take up to 12 weeks of leave and receive 67% of their average weekly wage, capped at $1,228.53 per week (based on 67% of the statewide average weekly wage of $1,833.63).18Paid Family Leave. New York Paid Family Leave Updates for 2026 The program is funded entirely through employee payroll deductions. For 2026, the contribution rate is 0.432% of gross wages, with a maximum annual employee contribution of $411.91.
Employers must hold the employee’s job (or a comparable position) during leave and continue their health insurance on the same terms as if the employee were still working. Retaliation for requesting or taking Paid Family Leave is prohibited, and the combined total of disability leave and Paid Family Leave cannot exceed 26 weeks in any 52-week period.