Last Friday, employers contributing to multiemployer plans received some good news. As expected, the Internal Revenue Service amended the transition rule for 2014 originally set forth in its proposed regulations on the pay or play mandate. (The new text of the rule can be found here). An employer required by a collective bargaining agreement to contribute to a multiemployer plan for some or all of its employees is treated as having offered coverage to employees for whom it contributes as long as the plan offers to individuals who satisfy the eligibility provisions coverage that is affordable, provides minimum value and, subject to the transition rule for dependent coverage, offers dependent (i.e., children up to age 26) coverage.
This relief is notable in part because it applies to all employees for whom the employer is required by the collective bargaining agreement to make contributions, not just those who end up being offered the coverage. In addition, an employer can utilize this relief even if the multiemployer plan’s eligibility provisions result in coverage not being offered within three months after employment begins. Separately, multiemployer plans must still comply with the 90-day waiting period limitations, which presents unique challenges for multiemployer plans (such as those with hours-based eligibility). Nevertheless, this clarification of the pay or play transition rule is welcome relief to these plans and their contributing employers for 2014.
Of course, since the existence of multiemployer plans is ultimately dependent on the collective bargaining process, which often abhors uncertainty, one hopes that the IRS will soon provide guidance as to whether it will extend this transition rule beyond 2014 (or, if not, what rules will supplant it).