On February 10, 2014, the Department of the Treasury and IRS released final rules implementing the Employer Shared Responsibility Payment of Code Section 4980H, commonly referred to as the employer mandate. The final rules are lengthy and address many areas, but most importantly provide additional transition relief for employers with 50 to 99 full-time employees. These employers will not be subject to a penalty for failing to offer coverage to their full-time employees until 2016.
In general, the employer mandate provides that applicable large employers with 50 or more full-time employees and/or full-time equivalents are subject to a penalty if they don’t offer affordable health care coverage to their full-time employees, and at least one of those employees obtains a premium tax-credit or cost sharing subsidy in the Exchange.
Back in July, 2013, the effective date of the mandate was pushed back to 2015, along with the required reporting by employers.
The final rules do not change anything for employers with fewer than 50 full-time employees – they are not subject to any penalties or any reporting requirements. But there are changes for employers subject to the mandate.
For employers with 100 or more employees, the final rules provide a phase-in approach. These employers will need to offer affordable coverage to at least 70% of their full-time employees in 2015, or be subject to a penalty. This increases to 95% in 2016.
For employers with between 50 and 99 employees, there will be no penalty for 2015; it will not take effect until 2016. However, even though these employers cannot be subject to a penalty until 2016, they will still have to comply with the reporting requirements for 2015.
The final rules also offer additional guidance on how to count the number of full-time employees and shorten the permissible maximum measurement period from 1 year to 6 months. The final rules also state that there will be additional regulations issued in the near future that detail the employer reporting requirements.
With this newest guidance planning and strategizing is increasingly important. Employers on the edge of 100 full-time employees (including all members of their controlled group) will need to carefully measure their employees’ hours. The forthcoming regulations on the reporting requirements will also provide much needed guidance on what data employers need to be maintaining.
Should you have any questions please contact our Benefits team.