In July 2013, the employer mandate was pushed back until January 1, 2015 for all employers covered by the Act (i.e., those with 50 or more employees, including full-time equivalents (FTEs)). On February 10, the Department of the Treasury and the IRS again pushed back the date of parts of the ACA’s employer mandate.
The postponement will allow for a gradual phase-in of the mandate. This post covers the salient points to consider.
Larger covered employers. The employer responsibility provisions will generally apply to employers with 100 or more full-time or FTE employees starting January 1, 2015.
Smaller covered employers. The employer responsibility provisions will generally apply to employers with 50-99 full-time or FTE employees starting January 1, 2016.
For larger covered employers, this means that in 2015 you must offer coverage to at least 70 percent of full-time employees as one of the conditions to avoid an assessable payment, rather than offering coverage to 95 percent of full-time employees, which will be now be required starting January 1, 2016.
For smaller covered employers, this means that in order to avoid an assessable payment for failing to offer health coverage in 2015, they must provide a certification to the IRS. The certification must state that the employer employed between 50 and 99 full-time employees in 2014, that it did not cut any employees for the sole purpose of getting under the 99 worker threshold, and that the employer did not eliminate or reduce the health coverage previously offered as of February 2014. If there was a reduction in workforce, the employer must be able to cite bona fide business reasons for making such cuts, such as a reduction in company sales. Thus, smaller employers must still report on their employees and health coverage in 2015, but no penalties will be assessed until 2016.
In order to determine full-time employee status, employers may use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonable employees should be considered full-time. This method allows employers to take a snap shot of their employee rolls over a set period of time to assist them in identifying their full-time employees in advance of coverage periods. The final regulations clarify how to apply this method and how to apply the alternative monthly method of determining full-time status.
The following rules, which apply in 2014, have been extended to cover employers in 2015 as well:
Shared responsibility provision: Employers can determine whether they had at least 100 full-time or FTE employees in the previous year by referring to a period of at least six consecutive months, rather than a full year.
Non-calendar year plans: Employers with plan year, which does not start on January 1, will be able to begin complying with the employer responsibility provisions at the start of the employers’ plan year in 2015 rather than on January 1, 2015. The conditions for this relief are also expanded to include more plan sponsors.
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.
As employers prepare to comply with the mandate starting January 1, 2015, employers are allowed, on a one time basis, to use a measurement period of six to twelve months during 2014 in order to determine which employees are full-time or FTE for purposes of providing coverage. This rule also applies to determining a stability period, which is the period of time during which an employee who works variable hours must be offered coverage.
Additionally, the final regulations, like the proposed regulations, provide safe harbors that permit employers to use the wages they pay, their employees’ hourly rates, or the federal poverty level to determine whether coverage is affordable to employees.
Additional guidance has been provided with regards to various other employee categories, such as volunteers, educational employees, adjunct professors, seasonal employees and students working pursuant to federal or state-sponsored work-study programs as well.
A copy of the Fact Sheet issued by the Treasury Department can be found here.