IRS Grants Partial, Temporary Relief from the Affordable Care Act’s Employer Mandate


Under the Affordable Care Act’s Employer Mandate, employers with 50 or more full-time equivalent employees are required to offer affordable, minimum value health coverage to at least 95% of their full-time employees (and their dependents), or pay penalties to the IRS.

Last July, the Obama administration delayed the effective date of the mandate until January 1, 2015. In regulations issued on February 10, 2014, the IRS has further delayed implementation for some employers, and temporarily relaxed compliance standards for others. This “transition relief” includes the following provisions:  

  • For employers that have 50-99 FTEs during 2014, and that meet certain other requirements, the effective date of the mandate is delayed until the beginning of its 2016 plan year
  • For employers that have 100 or more FTEs the above-stated 95% requirement is reduced to 70% through the end of the plan year that begins in 2015
  • For certain non-calendar year plans, compliance with the mandate is not required until the beginning of the plan year (2015 or 2016 as the case may be)
  • Employers using the “look-back” period method of measuring hours of service (which we recommend) are permitted to use shorter look-back periods in 2014, provided certain requirements are met
  • Employers may use a reference period of at least six consecutive months in 2014 for determining whether it has 50 or more FTEs
  • Employers who take steps to offer dependent coverage during its 2015 plan year will not be liable for penalties for failing to fully offer dependent coverage. This does not apply to employers who reduce dependent coverage that was already offered by that employer in 2013 or 2014.

Please note that the reporting requirements under the Employer Mandate have not been further delayed. All employers with 50 or more FTEs will be required to perform extensive reporting on the health coverage offered in 2015.

Delays in the implementation of major tax provisions are not uncommon. Based on our experience with rollouts of other laws, we believe that the underlying infrastructure and requirements of the ACA will remain in place during the delay, with further guidance coming from the IRS and other regulatory agencies.

We strongly encourage employers to use this additional time to develop and tweak their compliance strategies.

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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