The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together, the “Act”), adds a new federal requirement, referred to as “employer responsibility,” that takes effect in 2014. Under the Act’s employer responsibility provisions, “applicable large employers” must pay a non-deductible excise tax penalty if any of their full-time employees are certified as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee. Colloquially referred to as a “free rider surcharge” (since it is imposed only when the government subsidizes coverage for employees of an employer), this provision is more complex and nuanced than it might at first appear. This client advisory explains the key features of employer responsibility and considers some implications for plan design.