New Delays and Transition Relief under ACA (Benefit Minute)
The Department of Treasury has issued final regulations implementing the employer shared responsibility requirements under the Affordable Care Act. While many of the provisions in the final regulations are similar to those in the proposed regulations, there is additional transition relief, including relief which further delays the effective date of the employer mandate in certain circumstances. Set forth below is a summary.
Additional Delay for Medium-Sized Employers
• Employers with 50 to 99 full-time equivalent employees (FTEs) determined on a control group basis will not be subject to employer shared responsibility penalties until the first day of their 2016 plan year if all of the following requirements are met:
• Employer size will be determined during 2014, using same rules that apply to determine whether an employer has fewer than 50 full-time equivalent employees (including seasonal worker exception and average employee count during any consecutive 6-month period in 2014);
• Employer must not eliminate or materially reduce health coverage offered as of February 9, 2014 or modify the plan year to begin on a later calendar date (requirements apply);
• Employer may not reduce the size of the workforce or the overall hours of service of its employees during 2014 in order to qualify for this transition relief; and
• Employer must certify qualification for this transition relief.
Relief for Employers with 100 or More FTEs
In general, a large employer must make an offer of coverage to at least 95% of full-time employees in order to avoid exposure to a penalty of $2,000 times the number of full-time employees (less 30). Transition relief for plan years beginning in 2015 only reduces this percentage to 70%. However, to the extent that an offer of coverage is not made to a full-time employee who qualifies for a premium tax credit, the employer would still be subject to a $3,000 penalty with respect to that employee in 2015.
In addition, for the 2015 plan year only, an employer subject to the $2,000 penalty will pay the penalty on the number of full-time employees less 80 (instead of 30), which reduces an employer’s total penalty exposure by $100,000.
Non-Calendar Year Plans of Large Employers
Employers with 100 or more full-time equivalent employees may qualify for transition relief to delay employer shared responsibility penalties until the first day of the 2015 plan year (instead of January 1, 2015) under one of three alternatives:
• Eligibility transition relief: employer will not be subject to penalty with respect to any employee who was eligible for coverage under the terms of the plan in effect on February 9, 2014 as long as affordable coverage that provides minimum value is offered as of the first day of the 2015 plan year to at least 70% of full-time employees.
• Significant percentage transition relief (all employees): employer will not be subject to a penalty with respect to any employee if at least 25% of all employees were covered under the plan on any date in the 12-month period ending February 9, 2014 or at least 33.3% of all employees were offered coverage during the most recent open enrollment period ending before February 9, 2014 as long as affordable coverage that provides minimum value is offered as of the first day of the 2015 plan year.
• Significant percentage transition relief (full-time employees): employer will not be subject to a penalty with respect to any employee if at least 33.3% of full-time employees were covered under the plan on any date in the 12-month period ending February 9, 2014 or at least 50% of full-time employees were offered coverage during the most recent open enrollment period ending before February 9, 2014 as long as affordable coverage that provides minimum value is offered as of the first day of the 2015 plan year.
In order to qualify for this transition relief, the employer must have maintained a non-calendar year plan as of December 27, 2012 and not the modified the plan year after December 27, 2012 to begin at a later calendar date. Employers eligible for the transition relief are responsible for meeting the reporting requirements for the entire 2015 calendar year.
First-Year Measurement Periods
Employers using the look-back measurement method to determine the full-time status of variable hour and seasonal employees may use a first-year Measurement Period that is shorter than the 2015 Stability Period as long as the Measurement Period is no less than 6 consecutive months and begins no later than July 1, 2014 (the Administrative Period cannot exceed 90 days). This relief does not apply to employees hired after the beginning of the Measurement Period.
Other Transition Relief
The final regulations include some additional transition relief:
• For January 2015 only, an employer that offers coverage to an eligible employee as of the first day of the first payroll period in January 2015 will be deemed to have offered coverage for the entire calendar month. Thereafter, if an employer fails to offer coverage for any day of a calendar month, the employee is treated as not offered coverage during that entire month.
• Employers that did not offer coverage to dependent children in 2013 and 2014 do not have to offer coverage to those dependents until the 2016 plan year as long as the employer takes steps to extend dependent coverage.