The ACA Employer Shared Responsibility Provisions require an employer with at least 50 full-time employees (including full-time equivalent employees) to offer health coverage to its full-time (30 hours per week) employees (and their dependents) that meets certain minimum standards set by the ACA or make a tax payment called the Employer Shared Responsibility Payment (ESRP) (which must be paid if a full-time employee receives a premium tax credit or reduced-cost health insurance through an ACA health insurance marketplace).
On February 10, 2014, the U.S. Treasury Department issued final rules on the Employer Shared Responsibility Provisions. In order to gradually phase in those provisions and assist employers in complying with those provisions, the final rules provide the following transition relief for 2015:
1. In 2015, the ESRP will only apply to employers with 100 or more full-time employees (including full-time equivalent employees); beginning in 2016, the ESRP will apply to employers with 50 or more full-time employees (including full-time equivalent employees); and
2. The percentage of full-time employees who must be offered health coverage (including dependent coverage) that meets the minimum ACA standards is being phased in from 70% in 2015 to 95% beginning in 2016.
For non-calendar year plans, the transition relief also applies to the portion of the 2015 plan year that falls in 2016.
In order to be eligible for the transition relief described in item 1 above, an employer generally must satisfy three conditions, with limited exceptions:
1. The employer on average must employ at least 50 full-time employees (including full-time equivalent employees) but fewer than 100 full-time employees (including full-time equivalent employees) on business days during 2014;
2. During the period beginning on February 9, 2014, and ending on December 31, 2014, the employer must not reduce the size of its workforce or overall hours of service of its employees in order to fall below the 100-employee threshold; and
3. During the period beginning February 9, 2014, and ending December 31, 2015 (or, for non-calendar year plans, ending the last day of the 2015 plan year), the employer must not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014.
The employer must certify on a prescribed form that it meets the above eligibility requirements.
The final rules also provide clarification regarding whether certain employees are considered full-time for purposes of determining whether the employer is subject to the Employer Shared Responsibility Provisions and which employees must be offered coverage meeting the minimum ACA standards in order to avoid the ESRP, including:
1. Volunteer fire and emergency responders;
2. Education employees and adjunct faculty;
3. Seasonal workers; and
4. Students in work-study programs.
The final rules also provide safe harbors for employers for purposes of determining whether the health coverage they offer is “affordable” (one of the ACA standards for avoiding the ESRP). Further, in addition to the two forms of transition relief referred to above, certain transition rules that applied to 2014 are extended to 2015 under the final rules (including, among others, rules relating to non-calendar year plans and the addition of dependent coverage).
For more information regarding the Employer Shared Responsibility Provisions (including the transition rules), please click here to view the U.S. Treasury Department Fact Sheet or click here to view an IRS Q&A. To view the final rules implementing the Employer Shared Responsibility Provisions, please click here.