In July, the government announced a one year postponement of the requirement for large employers to offer healthcare coverage to their full-time employees or risk paying a penalty. However, some of the transition rules that would have been in effect if the mandate had been in place for 2014 have not been carried forward to the new 2015 start date (or at least haven’t yet!).
Determining if you are an “Applicable Large Employer”
The mandate to offer coverage applies if you are an “Applicable Large Employer,” which means that you have employed, on average, at least 50 full-time employees on business days during the preceding calendar year. To determine if you have met that threshold, calculate the number of full-time employees for each month. (The number of full time employees for a calendar month is equal to:
The number of full-time employees (those working over 30 hours per week) plus
The hours of service of all part-time employees divided by 120.)
You add up all the full-time employees for each calendar month and divide the total by 12. If the result is 50 or more, you are an applicable large employer.
For 2014, there was a transition rule that allowed you to look at the number of employees over a period of as few as six consecutive calendar months in 2013, rather than the entire calendar year. This transition rule has not been carried over with the one year postponement, so you will have to look at all twelve months in 2014 to calculate the average number of full-time employees you have.
Fiscal Year Plans
Under a transition rule for the 2014 start date, an employer with a fiscal year plan (i.e., one that does not run on a calendar year basis) did not need to worry about the employer mandate until the first day of the 2014 plan year. For example, if a plan year ran from July 1, 2013 to June 30, 2014, the employer would not have been required to offer coverage to its full-time employees until July 1, 2014. This transition rule has not been carried forward. Employers with fiscal year plans will need to make sure their plan offers coverage to full-time employees on January 1, 2015 (or risk paying a penalty). If your plan runs from July 1, 2014 to June 30, 2015, you will either have to start offering coverage to full-time employees on July 1, 2014, or add employees mid-plan year on January 1, 2015.
2014 Measurement Periods
To determine whether an employee is a full-time employee entitled to coverage under the plan, the regulations allow you to use a “standard measurement period.” If, during the standard measurement period, an employee averages 30 or more hours per week worked, then he or she would be considered a full-time employee during the subsequent “stability period.” Under the regulations, the standard measurement period must be the same length as the standard stability period. So, if you wanted to determine who was a full-time employee and entitled to elect coverage for the entire 2014 plan year, you would have to have a standard measurement period that is 12 months long. However, for the 2014 plan year, there was a transition rule that allowed a plan to use a standard measurement period as short as six months, even if the stability period was 12 months. This transition rule was not carried forward for the 2015 year. Therefore, if you are planning on having a stability period that is twelve months long, you will need to have a standard measurement period that is also 12 months long. For stability periods beginning on January 1, 2015, that means that you will need to start counting employee hours on January 1, 2014, or even earlier, if you plan on having an “administrative period” between your standard measurement period and your stability period. (You may have an administrative period of up to 90 days between the standard measurement period and the stability period.)
The one-year postponement gave plans a short reprieve; however, it is time now to start taking action to make sure you are in compliance with the rules by January 1, 2015.