Play-or-Pay Reprieve for Some Employers

by Best Best & Krieger LLP
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The Press-Enterprise - March 23, 2014.

BB&K's Isabel Safie Informs Businesses About the Affordable Care Act’s Employer-Shared Responsibility Mandate

Certain employers may be eligible for a delay in implementing the Affordable Care Act’s employer-shared responsibility mandate, also known as the play-or-pay rules, according to the final rules that were released in February.

However, certain conditions have to be met to be eligible for this relief and it is only temporary.

The play-or-pay rules were intended to go into effect on Jan. 1, 2014 for most large employers (those with at least 50 full-time-equivalent employees) during the prior calendar year. However, the first delay in the implementation of these rules came last year when the effective date was pushed back to the first day of the plan year beginning on or after Jan. 1, 2015.

Aware of the burden that complying with the play-or pay rules has placed on employers yet committed to moving forward with this critical element of the Affordable Care Act, the administration has opted to de- lay the implementation of the play-or-pay rules one more year, to Jan. 1, 2016, for certain large employers.

This additional delay allows for a gradual phase-in of the play-or-pay rules to ease the burden on some employers. For those employers who are eligible for the one year delay but which have already begun to comply with the rules, this delay merely offers an opportunity to further test out the sufficiency of their coverage.

To determine if an employer is eligible to take advantage of the one-year delay, the government has determined that an employer must meet the following four requirements:

1. The employer must have employed 50 to 99 full-time employees (including fulltime- equivalent employees) during 2014. For this purpose, the measuring period must be between 6 and 12 consecutive months. (Employers with less than 50 fulltime employees, including full-time equivalent employees, are not subject to the play-or-pay rules.)
2. The employer cannot reduce the size of its workforce or the overall hours of service of its employees during the period of Feb. 9- Dec. 31, 2014, solely for the purpose of becoming eligible for this delay. A reduction in the number of employees or hours worked for legitimate business reasons, such as due to the loss of a contract, a downturn in the economy or poor employee performance, will not affect eligibility for this one-year delay.

3. The employer cannot eliminate or reduce the health coverage it offers to employees during the period beginning on Feb. 9, 2014 and ending on the last day of the plan year beginning in 2015 (e.g., Dec. 31, 2015 for calendar year plans). To comply with this requirement, the employer must generally maintain the same or better rate of contribution toward the cost of employee-only coverage. Additionally, the employee-only coverage offered to employees must cover at least 60 percent of the total cost of medical services provided under the plan. Also, the employer cannot alter the eligibility terms of the plan such that the class of employees to whom coverage was offered on Feb. 9, 2014 is reduced.

4. The employer must certify, on a form to be designated by the Internal Revenue Service, that it satisfies these requirements. Final rules on the information reporting obligations under the play-or-pay rules (released on March 10) confirm that this certification will be made on the same form used to satisfy these obligations. Therefore, employers who are eligible for the one year delay will still need to comply with the information reporting requirements by submitting the designated form in 2016 for plan years beginning in 2015.

Notably, this delay may not be the last. A fact sheet released by the Treasury Department concurrently with the final rules suggests that compliance may continue to be a moving target as it advises that further delays may be warranted. With so much uncertainty on the timing of the implementation of these rules, it is important for employers to remain well-informed.

* This article first appeared in The Press-Enterprise on Mar. 23, 2014. Republished with permission.

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