By: Alan M. Levy
Most employer mandate penalties for not satisfying Obamacare coverage requirements have now been waived until December 31, 2015. On February 10, 2014, the Internal Revenue Service filed final regulations on “Employer Shared Responsibility” under the Affordable Care Act (“ACA”), Agency Document Number 2014-03082 (official publication date January 12, 2014). The new regulations announced that employers with 50 to 99 full-time employees and/or full-time equivalents (“FTEs”) have until 2016 before any penalties will be applied to them for failure to provide affordable and adequate health insurance as defined in the Act. In addition, employers with 100 or more employees will not be penalized during 2015 if they provide adequate, affordable insurance for at least 70% (instead of 95%) of their employees. Final rules were also provided as to how to determine which employers and employees are covered by the ACA, how to calculate employer penalties under the law, and how those penalties will be collected. They also state that volunteers such as firefighters and EMTs are not to be counted as full-time employees under the ACA.
The principal requirements for employers of 50 to 99 FTEs to retain the waiver are that they:
1. Must employ, on average, at least 50 and no more than 99 FTEs for all business days in 2014;
2. May not reduce the size of their workforce or the overall hours of service of their employees in order to qualify for this transitional relief/waiver; and
3. May not eliminate or materially reduce coverage nor reduce employer contribution amounts below 95% of what was in place on February 9, 2014.
Employers of 100 or more FTEs lose the waiver if one of their covered employees obtains a premium tax credit in 2015. Thus, the “transitional relief” is cancelled if any full-time employee of the employer with more than 100 FTEs receives a premium tax credit from a Marketplace/Exchange because the plan which was offered to at least 70% of the workforce is not affordable or not adequate for that individual. Cancellation will also occur if an employer of 50 to 99 FTEs does not maintain its workforce’s size or hours, or if the health care coverage it does offer falls below that which it had in place as of February 9, 2014.
These new rules are clearly a relief to many employers. However, they are complex; the need for further clarification is inevitable. For the moment, Treasury and IRS has simply said:
“While about 96 percent of employers are not subject to the employer responsibility provision, for those employers that are, we will continue to make the compliance process simpler and easier to navigate . . . [these] regulations phase in the standards to ensure that larger employers either offer quality coverage or make an employer responsibility payment starting in 2015 . . . .”
Should you have any questions about these new rules, please contact Alan Levy, the Lindner & Marsack attorney who focuses on employee benefits issues.