ACA Employer Mandate Final Regulations Released; Enforcement Delays Provided for Mid-Sized Employers

by Ballard Spahr LLP
Contact

Very large employers will be required to offer health care coverage to their full-time employees or pay a penalty to the federal government beginning January 1, 2015. Under the final regulations released by the U.S. Department of Treasury (Treasury Department) on February 10, 2014, however, employers with fewer than 100 full-time employees will have an extra year to plan for and implement the employer mandate.

For larger employers, enforcement in 2015 will apply only to employers who fail to offer coverage to at least 70 percent of their full-time workforce. The regulations also provide additional guidance for determining the status of full-time employees and counting hours of service. Otherwise, the final regulations retain most of the guidance issued in the proposed regulations and four earlier Internal Revenue Service notices on minimum value and reporting requirements and methods for determining employee status.

The shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA) require large employers to offer full-time employees (and their dependents) the opportunity to enroll in adequate and affordable coverage under an employer-sponsored plan or pay a penalty. The rules are often referred to as the employer mandate or pay-or-play requirement. In July 2013, the Treasury Department announced that no penalties would apply for 2014 and delayed related informational reporting obligations for large employers and providers of their plans. With the issuance of these final regulations, employers subject to the mandate can now make employee coverage decisions and prepare for enforcement beginning as early as January 1, 2015.

Highlights of the final regulations include:

Delay of Employer Mandate

The final regulations reaffirm that the requirement to offer health coverage applies only to employers with an average of at least 50 full-time employees, based on the prior year's data. To ensure a gradual phase-in of the employer mandate, however, the final regulations provide that only employers with 100 or more full-time employees will be subject to the employer mandate for 2015. Employers that are subject to the employer mandate provisions in 2015 must offer coverage to at least 70 percent (as opposed to 95 percent) of their full-time employees (and their dependents) to avoid a penalty.

Beginning in 2016, employers with 50 or more full-time employees will be subject to the employer mandate. Employers that are subject to the employer mandate provisions in 2016 must offer coverage to at least 95 percent of their full-time employees (and their dependents) in order to avoid a penalty.

Full-Time Employee Status Determinations

Like the proposed regulations, the final regulations allow employers to use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonal employees are full-time employees (employees who average at least 30 hours of service per week). The final regulations clarify the application of this method (along with the associated administrative and stability periods) and the alternative monthly method of determining full-time employee status.

Hours of Service Guidance

The Treasury Department discusses the challenge of determining "hours of service" for employees of certain types or in certain occupations and identifies certain methodologies that will be accepted as reasonable until further guidance is issued, including:

  • Adjunct faculty: Employers of adjunct faculty must use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the employer mandate provisions. The Treasury Department has determined that one reasonable method is to credit an adjunct faculty member with 2¼ hours of service per week for each hour of teaching or classroom time and one hour of service per week for each additional hour outside of the classroom the faculty member spends performing required duties.
  • Employees with "on-call" hours: Employers of employees with on-call hours are to use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the employer mandate provisions. The Treasury Department provides a few examples, including that an employer must credit an employee with an hour of service for any on-call hour for which the employee has been paid or is entitled to payment.
  • Temporary staffing firms: The final regulations discuss how employees of temporary staffing firms should be categorized and when such employees have separated from service with the staffing firm.
  • Seasonal employees: Employees in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.
  • Rehired employees: The final regulations retain the rehire rules contained in the proposed regulations but reduce, in most situations, the length of the break in service required before a returning employee may be treated as a new employee from 26 weeks to 13 weeks.

The regulations exclude from "hours of service" certain workforce activities, including:

  • Hours contributed by bona fide volunteers for a government or tax-exempt entity
  • Service performed by students under federal or state-sponsored work-study programs
  • Any work performed by an individual who is subject to a vow of poverty as a member of a religious order when the work is in the performance of tasks usually required of an active member of the order

Notably, the final regulations do not include any special provisions that address short-term employees or employees in high-turnover positions.

Affordability Safe Harbors

The final regulations preserve several safe harbors that are designed to make it easier for employers to determine whether the coverage they offer is affordable to employees. These safe harbors permit employers to use the Form W-2 wages they pay, their employees’ hourly rates, or the federal poverty level in determining whether employer coverage is affordable under the ACA. The Treasury Department clarified a few outstanding questions on how these safe harbors should be administered.

2015 Transition Provisions

In addition to the 2015 transition relief provided regarding the employer mandate (addressed above), the final regulations extend 2015 transition relief to several other rules that originally applied only to 2014 under the proposed regulations, including:

  • Non-calendar year plans: Employers with plan years that do not start on January 1 will be subject to the employer mandate when their plan years begin in 2015, rather than on January 1, 2015.
  • Transition measurement period: For stability periods that begin in 2015, employers may adopt a transition measurement period that is shorter than 12 months but no less than six months, even if the corresponding stability period is 12 months.
  • Determining large employer status in 2015: Employers can determine whether they are a large employer for 2015 by reference to a period of at least six consecutive months in 2014, instead of the full 2014 calendar year.
  • Dependent coverage: The requirement 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.
  • Multiemployer plans: Like the proposed regulations, the final regulations contain transition guidance that is intended to provide employers that contribute to multiemployer plans with an administratively feasible means to comply with the employer mandate.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP
Contact
more
less

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!