Employers with 50 to 99 employees were granted a break on Monday when the U.S. Treasury Department gave them an additional year to comply with the employer mandate of the Affordable Care Act (ACA). This relief was granted as part of the final regulations issued in connection with the employer mandate. Employers subject to the employer mandate must offer affordable minimum value coverage to all of their full-time employees or risk exposure to significant penalties.

Until yesterday, all employers with 50 or more full-time employees had to comply with the employer mandate starting in 2015. Now only employers with 100 or more employees must comply with the mandate in 2015. Employers with 50 to 99 employees have been given an extra year, and they must now comply with the employer mandate in 2016. Penalties will not be imposed on these employers until 2016.

The relief offered by the Treasury Department is not without conditions, however. In order to get the benefit of this extension of time, employers that have an average of 50 to 99 employees on business days during 2014 must meet the following conditions:

  1. Employers cannot reduce the size of their workforce or the overall hours of service of their employees during 2014, except for bona fide business reasons. Reductions of workforce size or overall hours because of business activity, such as the sale of a division, changes in the economic marketplace, terminations of employment for poor performance or other similar changes unrelated to eligibility for this extension will not affect eligibility for the extension.
  2. Employers cannot eliminate or materially reduce the health coverage they offer to employees between now and 2016. An employer will meet this requirement if: a) it continues to offer each employee eligible for coverage an employer contribution toward the cost of employee-only coverage that is either at least 95 percent of the contribution in effect on February 9, 2014, or at least the same percentage of the cost of coverage contributed on February 9, 2014; and b) if the plan changes the benefits of its employee-only coverage, it always provides at least “minimum value,” as calculated under the ACA; and c) it does not amend its plan to reduce the classes of employees and dependents to whom it offers coverage.
  3. Employers must timely certify to the Internal Revenue Service that they have met these requirements.

For non-calendar year plans, this relief applies to all of 2015 and the months in 2016 that fall within the plan year that begins in 2015. However, if the employer changes its plan year to begin on a later date, it will lose this extension into 2016.

For new employers—those that were created in 2015—this relief applies if the employer reasonably expects to have, and actually has, fewer than 100 full-time employees during 2015.

The U.S. Treasury Department estimates that 96 percent of employers have less than 50 employees and are never going to be subject to the employer mandate and that 2 percent of employers have 100 or more employees. The other 2 percent of employers fall between 50 and 99 employees and will receive the benefit of this extension of time. The Treasury Department says that many of these mid-sized employers did not previously offer health coverage, or offered health coverage that does not comply with the requirements of the ACA, and so relief is provided until 2016 to assist these mid-sized employers in transitioning into compliance with the employer mandate.

For mid-sized employers, the additional time offered by the final regulations is welcome relief, particularly for employers that may have been struggling to reconcile the requirements of the employer mandate with their own business and staffing needs. Even so, the relief is conditional, and employers don’t have a free hand to make significant reductions to staffing or health plan coverage during 2015. While many employers will now have some breathing room to come into compliance with the employer mandate, they are well advised to use that additional time productively—2016 is not that far away.

Topics:  Affordable Care Act, Delays, Pay or Play, Shared Responsibility Rule, Small Business, U.S. Treasury

Published In: Health Updates, Labor & Employment Updates, Tax Updates

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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