With multiple requirements and ever evolving deadlines, ensuring that your property is in compliance with the Affordable Care Act can be challenging. Below, Laura Kerekes gives an overview of the recent Treasury Department and IRS announcement and discusses its impact on employers, both large and small.
The Department of the Treasury and the Internal Revenue Service announced today that the Affordable Care Act’s health coverage mandate for employers with more than 50 employees but fewer than 100 employees working at least 30 hours per week will be delayed another year until 2016.
Employers with over 100 employees working at least 30 hours per week will become subject to the health coverage mandate under the Affordable Care Act (ACA) as previously announced beginning in January 2015. If these employers decide not to offer insurance to their employees, they will make an employer shared responsibility payment beginning in 2015 to help offset the costs to taxpayers for employees getting tax credits through the Health Insurance Marketplace.
“While about 96 percent of employers are not subject to the employer responsibility provision, for those employers that are, we will continue to make the compliance process simpler and easier to navigate,” said Assistant Secretary for Tax Policy Mark J. Mazur in the Treasury press release. “Today’s final regulations phase in the standards to ensure that larger employers either offer quality, affordable coverage or make an employer responsibility payment starting in 2015 to help offset the cost to taxpayers of coverage or subsidies to their employees.”
Today’s announcement included final regulations for implementing the employer shared responsibility provisions under the ACA, often referred to as the “Play or Pay” rules that will take effect in 2015.
To avoid this payment for the failure to offer affordable coverage meeting the minimum requirements as set forth in the regulations, these large employers will need to offer coverage to 70 percent of their full-time employees in 2015 and 95 percent starting in 2016. Full-time employment is defined as regularly working at 30 or more hours per week.
The immediate practical impact for employers includes:
- For employers with fewer than 50 employees: No impact, as this group was not subject to the employer shared responsibility provisions previously.
- For employers with 50 to 99 employees: For employers in this group that do not provide full-time employees with quality affordable health insurance, they will not have to pay any employer responsibility penalties in 2015. For 2015, this group will still be subject to provide an employee and coverage report as outlined in the ACA rules but will have until 2016 before the employer responsibility payments begin.
- For employers with 100 or more employees: Employers in this group are still subject to the mandate starting in 2015. What follows below are the highlights of the final regulations released today impacting the mandate for these employees to comply in 2015.
Key Elements of the Final Rules Impacting Employers with 100+ Employees in 2015
According to the Treasury Department Fact Sheet, the final regulations include the following changes:
- Coverage Thresholds: To avoid a payment for failing to offer health coverage, employers need to offer coverage to 70 percent of their full-time employees in 2015 and 95 percent starting in 2016. The original ACA rules required the 95 percent coverage beginning immediately.
- Full-time Employee Definitions:
- Volunteers: Bona fide volunteers for a government or tax-exempt entity, such as volunteer firefighters and emergency responders, will not be considered full-time employees.
- Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer.
- Seasonal employees: Those in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.
- Student work-study programs: Service performed by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.
- Adjunct faculty: Until further guidance is issued, employers of adjunct faculty are to use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the employer responsibility provisions. However, to accommodate the need for predictability and ease of administration and consistency, the final regulations expressly allow crediting an adjunct faculty member with 2 ¼ hours of service per week for each hour of teaching or classroom time as a reasonable method for this purpose.
- Full-time Employee Measurements: The final rules remain unchanged from the proposed rules that allow employers to use an optional look-back measurement method to determine whether employees with varying hours and seasonal employees are full-time. On a one-time basis, in 2014 preparing for 2015, plans may use a measurement period of six months even with respect to a stability period – the time during which an employee with variable hours must be offered coverage – of up to 12 months.
- Affordability Safe Harbors: As with the proposed regulations, the final rules provide safe harbors for employers to determine whether the coverage they offer is affordable to employees, including the W-2 wages, employees’ hourly rates, or the federal poverty level.
- Other Provisions of the Final Regulations:
- Employers first subject to shared responsibility provision: Employers can determine whether they had at least 100 full-time or full-time equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year.
- Non-calendar year plans: Employers with plan years that do not start on January 1 will be able to begin compliance with employer responsibility at the start of their plan years in 2015 rather than on January 1, 2015, and the conditions for this relief are expanded to include more plan sponsors.
- Dependent coverage: The policy that employers offer coverage to their full-time employees’ dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.
Treasury and the IRS stated that additional final regulations will be forthcoming to streamline the ACA reporting requirements. Final rules will be published in the Federal Register on February 12th. We will continue to provide updates as more information is known.
For more information:
Treasury Press Release: http://www.treasury.gov/press-center/press-releases/Pages/jl2290.aspx
IRS Regulations (227 pages): https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf