Affordable Care Act's Employer Mandate Delayed for Certain Employers

by Holland & Knight LLP

  • This alert explains key aspects of the Affordable Care Act (ACA) final regulations issued by the Treasury Department and the IRS on February 10, 2014.
  • It is critical for employers to understand the additional ACA compliance delay extended to some employers under these new rules, as well as new employer safe harbors and employee categorization clarifications.

On February 10, 2014, the Department of Treasury and Internal Revenue Service issued final regulations regarding employer responsibility under the Affordable Care Act (ACA), also referred to as Obamacare. The final regulations further delay for certain employers compliance with the ACA, clarify the definitions of certain categories of employees and outline some safe harbors for employers. This alert provides a summary of the new regulations.

Immediate Impact

  • For employers with fewer than 50 full-time employees, there is no change in obligations provided by the new regulations. Under the ACA, employers with fewer than 50 employees are still not required to provide coverage.
  • For medium-sized employers with 50 to 99 full-time employees, the new regulations give more time to comply with the requirements of the ACA. Employers with 50 to 99 employees have until January 1, 2016, to provide full-time employees with quality affordable health insurance or pay a penalty.
  • For employers with 100 or more employees, the new regulations provide for a grace period. To avoid a penalty in 2015, this group of employers needs to give coverage to 70 percent of their full-time employees in 2015 and 95 percent of their full-time employees in 2016 (the original rules required 95 percent coverage in 2015).

To qualify for these one-year delays in enforcement of the employer mandate, employers will be required to certify (under penalty of perjury) that they are not eliminating jobs or reducing hours to get under the threshold to qualify for the delay. Those who do not provide such a certification will have to meet the current requirements.

Employee Definitions

The final regulations provide clarifications regarding whether employees of certain types or in certain occupations are considered "full-time."

  • Volunteers: Bona fide volunteers for government or tax exempt entities (such as volunteer firefighters) will not be considered full-time employees
  • Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed for the summer.
  • Seasonal employees: People employed in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.
  • Student work-study programs: Work performed by students under federal or state work-study programs will not be considered full-time employment.
  • Adjunct faculty: Until further guidance is provided, employers of adjunct faculty are to use a "reasonable" method of crediting hours of service. Generally, crediting an adjunct faculty with 2.5 hours of service per week for each hour of teaching or classroom time is a "reasonable" method.

Safe Harbors

The final regulations provide safe harbors that make it easier for employers to determine whether the coverage they offer is affordable to employees. These safe harbors permit employers to use the wages they pay, their employees' hourly rates or the federal poverty level to determine whether employer coverage is affordable under the ACA.

Other Provisions of the Final Regulations

In addition to the delays discussed above, the limited transition rules (pertaining to dependent coverage, non-calendar year plans and look-back periods) that applied to 2014 have been extended to 2015 under the final regulations.

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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