Implementation of the Affordable Care Act's Play or Pay Rules Eased for Mid-Sized Employers

by Best Best & Krieger LLP
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Transition Guidance Included in the Final Regulations Postpones Implementation for Many Employers

Yesterday, the Department of the Treasury released the final regulations implementing the Affordable Care Act’s employer shared responsibility provisions, commonly known as the “Play or Pay” rules. The final regulations contain transition guidance that postpones the application of the rules for employers with at least 50 but less than 100 full-time employees (including full-time equivalent employees) until 2016, if certain requirements are satisfied.

The additional delay is intended to “ensure a gradual phase-in” to ease the burden on mid-size employers. The transition guidance allows employers to select a period of at least six consecutive months during 2014, rather than the entire year, to determine the number of full-time employees (including full-time equivalent employees) it employs and whether they are subject to the Play or Pay rules. 

For employers that employ 50-99 full-time employees (including full-time equivalent employees) in 2014, the transition relief delays the implementation of the Play or Pay rules until 2016. To be eligible for this delay, the employer cannot reduce the size of its workforce or employees’ hours of service in 2014 if the purpose for doing so is to meet the workforce size requirement. The employer also cannot eliminate or materially reduce the health coverage it offers as of February 9, 2014. Finally, the employer must certify, on a prescribed form, that it satisfies the foregoing requirements.

While employers with 100 or more full-time employees (including full-time equivalent employees) will be subject to the Play or Pay rules in 2015, the transition guidance includes provisions beneficial to these employers. For example, if certain requirements are met, employers that opt to use the look-back measurement period are allowed to use an abbreviated measurement period for the purpose of the stability period beginning in 2015. Further, while the regulations generally require that employers subject to the Play or Pay rules offer coverage to at least 95% of their full-time employees in order to avoid the no coverage offered penalties, the transition guidance provides that employers will not be subject to these penalties if coverage is offered to at least 70% of the employer’s full-time employees.

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.

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