A key feature of Obamacare has been postponed for mid-sized employers: the “pay or play” (formally, the “employer shared responsibility”) provisions that will require employers with at least 50 full-time equivalent employees to either provide minimum essential coverage to substantially all (i.e, 95%) of their full-time employees or pay excise taxes. The provisions were originally to have become effective on January 1, 2014 but were previously postponed to January 1, 2015. Final regulations issued on February 10, 2014 further postpone the application of those provisions to employers with between 50 and 99 full-time equivalent employees until January 1, 2016.
Employers with at least 100 full-time employees will still become subject to the pay or play rules on January 1, 2015, but the new guidance does provide a helpful one-year transition rule. For these large employers, “substantially all” full-time employees has been redefined to mean 70% instead of 95%. In other words, large employers that provide minimum essential coverage to 70% of their full-time employees in 2015 will not be subject to the “sledge hammer” penalty of $2,000 per full-time employee. However, they would still be potentially subject to the smaller “tack hammer” penalty of $3,000 per full-time employee who receives subsidized coverage through the Exchange. In 2016, “substantially all” reverts to the 95% threshold.
The new regulations also update and revise transition rules for non-calendar year plans, as well as clarify the methods employers may use to track employee hours to determine who is considered a full-time employee.
To access a fact sheet on the rules, click here.