President Obama’s re-election confirmed that the Affordable Care Act will continue to be rolled out, and that its “pay-or-play” rules will become effective on January 1, 2014. These provisions require public and private employers with 50 or more full-time employees to provide affordable health coverage for their employees and pay for 60% of the cost, or pay an excise tax to the IRS ($2-3,000 per employee, per year). Under these rules, full-time means 30 or more hours per week. Part-time employees are pro-rated according to a multi-step formula, but certain seasonal employees may be excluded. Coverage is “affordable” if the employee’s portion of the cost is 9.5% or less of the employee’s household income. 

To prepare for January 1, we recommend that employers take several steps:

  1. Determine whether your organization has 50 employees or more under the ACA formulas.
  2. Determine whether transition relief applies. Regulations issued late last year provide alternatives to full compliance on January 1, 2014 for many non-calendar year health plans, as well as for employers close to the 50-employee threshold. 
  3. Begin examining the IRS safe harbors for compliance requirements and opportunities. Full compliance requires public and private employers to provide at least 95% of their full-time employees with affordable coverage that meets the ACA’s minimum value standards.  We recommend examining employees’ work histories now to determine who must be covered as of January 1, and investigating ways to make that coverage affordable to those employees. For some employers, this examination may lead to redefining worker status and/or budgeting for additional compensation and compliance costs. 
  4. Develop internal systems to track, document and report the offer of coverage to full time employees. For most employers, this will require using the IRS safe harbor look-back periods. Without this safe harbor, employers will be required to determine each employee’s eligibility on a month-to-month basis.
  5. Investigate affordability safe harbors developed by the IRS. The general affordability rule will be difficult to administer for most employers. The safe harbors are easier to administer, but may give skewed results in some circumstances. We recommend modeling various options and developing ways to meet affordability requirements while keeping additional costs to a minimum.
  6. Amend plan documents and employee handbooks to ensure consistent messaging and ERISA compliance, and plan for upcoming reporting requirements in 2015.

By following these six steps, we believe all employers will be well on their way to surviving and thriving in a post-ACA world.

To help employers, including municipalities, with ACA compliance, Bernstein Shur has assembled the ACA Team, a multi-specialty group of attorneys from employment law, litigation and tax. The ACA Team is available for flat-fee, full compliance audits, and half-day and full-day workshops. For more information about the ACA or our services, please contact Steve Gerlach at 207 228-7128 or sgerlach@bernsteinshur.com.