Additional relief measures have been introduced in the final regulations on shared responsibility under the Affordable Care Act (ACA). 

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The provisions of shared responsibility have an impact on “applicable large employers” which are generally employers having 50 or more employees who work full-time [including those who work full-time equivalent hours (FTEs)] in the previous year. According to the ACA, an applicable large employer that fails to provide affordable health coverage that meets minimum standards to its full-time employees may have to pay a penalty if a full-time employee enrolls in a qualified health plan and receives a premium tax credit.

Although the ACA initially stated that these rules would be enforced starting from January 1, 2014, Notice 2013-45, which was released on July 9, 2013, offered temporary relief for 2014. This meant that no payments would be required until at least January 1, 2015. .

The ultimate rules offer direction on various matters that were addressed during the release of the proposed rules on December 28, 2012, such as how seasonal employees and adjunct faculty are considered “full-time” employees. However, the most noteworthy components of the ultimate rules are those that offer ongoing relief during the transition period, specifically for employers with a minimum of 50 full-time employees but less than 100 full-time employees.

Exemption granted to big employers that have less than 100 full-time workers. 

The final rules acknowledge that implementing the shared responsibility provisions of the ACA will result in changes for large employers who previously did not provide coverage, or did not offer affordable coverage that meets minimum standards. The final rules also mention that many of these employers are on the smaller side, with less than 100 full-time employees (including FTEs). To help these employers, there is transition relief available for the entire year of 2015. Additionally, for any non-calendar year plan starting in 2015, the portion of the plan year that falls in 2016 is also eligible for transition relief. As long as these employers meet certain conditions, they will not be subject to any fines or penalties.

  1. The company has an average of 50 or more full-time employees (including FTEs), but less than 100 full-time employees (including FTEs).
  2. The employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. Nevertheless, downsizing the workforce or decreasing the total amount of work hours due to legitimate business justifications will not be regarded as being done to meet the workforce size requirement.
  3. During the coverage maintenance period (i.e., the period ending December 31, 2015, or the last day of the plan year that begins in 2015) the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. The final regulations outline exceptions where an employer will not be treated as eliminating or materially reducing health coverage—namely where the employer continues to offer each eligible employee an employer contribution toward the cost of employee-only coverage; coverage provides minimum value after the change in benefits; and the employer does not alter the terms of its group health plans to narrow or reduce the class or classes of employees to whom coverage under those plans was offered on February 9, 2014.
  4. The applicable large employer certifies that it meets the eligibility requirements set forth above. Such certification will be made on an as-yet-to-be published form.

The exemption from this transitional relief is not accessible to large employers who have 100 or more full-time employees (including FTEs). These employers will be liable to potential payments starting from January 1, 2015.

Transition Guidance for 2015

Non-Calendar Year Plans

Employers whose plan years do not commence on January 1st will have the option to commence adherence with the shared responsibility mandates at the beginning of their plan years in 2015, as opposed to January 1st, 2015.

 Stability periods beginning in the year 2015 may have shorter intervals of measurement

As a one-time arrangement in 2014 in preparation for 2015, it is possible for plans to utilize a measuring period of six months, even in relation to a stability period of up to 12 months, which is the duration when employees with fluctuating work hours must be provided with insurance coverage.

A shorter time period is now allowed for determining the status of being an applicable large employer for the year 2015. 

Employers have the option to assess whether they had a minimum of 100 full-time employees or FTEs in the previous year by looking at a span of at least six consecutive months, as opposed to reviewing the entire year. The final regulations explain that this approach will make it easier for employers who are new to the shared responsibility provisions to ensure compliance.

Coverage for Dependents

To prevent having to pay a penalty, a large employer must give health insurance to its full-time employees and their dependents. If an employer starts taking action towards offering coverage for dependents of full-time employees in 2016, they will not be responsible for any penalties for not offering coverage to dependents during the 2015 plan year. The official rules state that a “dependent” is a child of an employee who is under the age of 26, and it specifically does not include spouses in the definition.

 Extra Limited 2015 Transition Relief. 

Provides coverage to a minimum of 70 percent of employees working full-time. 

The final rules generally state that an applicable large employer is considered to be providing coverage to its full-time employees if it offers coverage to all but a small number of them. However, as additional transitional assistance, an applicable large employer that offers coverage to at least 70 percent (or fails to offer to no more than 30 percent) of its full-time employees will not be subject to a penalty. This transitional relief applies to all applicable large employers without any limit on the number of full-time employees (including full-time equivalents). It is meant to assist employers who currently offer coverage to employees working 35 or more hours, but not yet to those working 30 to 34 hours per week.

Determining the amount of payments that can be assessed for large employers with 100 or more full-time employees during the year 2015. 

Typically, a payment that can be assessed is determined by multiplying the number of full-time employees (excluding 30 full-time employees) by one-twelfth of $2,000 for each month of the year. However, for the year 2015 as well as any months in 2016 that fall within the employer’s 2015 plan year, if a large employer with 100 or more full-time employees (including FTEs) is subject to an assessable payment, the payment will be calculated by subtracting 80 from the employer’s total number of full-time employees, instead of subtracting 30. This deduction of an additional 50 full-time employees can potentially significantly reduce or completely eliminate the employer’s assessable payment for 2015.

The latest rules offer substantial leeway during the years 2014 and 2015, and employers who may be affected should assess the consequences of these rules on their responsibility to provide healthcare benefits to their staff. Specifically, employers with a staff size ranging from 50 to 100 full-time employees (including equivalent part-time employees) have been granted an additional year without any penalties, regardless of whether they provide coverage or if the coverage they provide is reasonably priced.

 

Frequently Asked Questions

Who is considered as an “applicable large employer” according to the ACA?

An “applicable large employer” according to the ACA is generally an employer who has 50 or more full-time employees, including those who work full-time equivalent hours (FTEs), in the previous year.

What are the penalties for applicable large employers that fail to provide affordable health coverage?

An applicable large employer that fails to provide affordable health coverage that meets minimum standards to its full-time employees may have to pay a penalty if a full-time employee enrolls in a qualified health plan and receives a premium tax credit.

What is the transitional relief available for employers with less than 100 full-time employees?

The transitional relief is available for the entire year of 2015, and for any non-calendar year plan starting in 2015, the portion of the plan year that falls in 2016 is also eligible for transition relief. As long as these employers meet certain conditions, they will not be subject to any fines or penalties.

What are the conditions that employers with less than 100 full-time employees must meet to be eligible for transitional relief?

The conditions include:
1. The company has an average of 50 or more full-time employees (including FTEs), but less than 100 full-time employees (including FTEs).
2. The employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition, unless there are legitimate business justifications.
3. During the coverage maintenance period, the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014.
4. The applicable large employer certifies that it meets the eligibility requirements.

What is the transition guidance for 2015 regarding non-calendar year plans?

Employers whose plan years do not commence on January 1st will have the option to commence adherence with the shared responsibility mandates at the beginning of their plan years in 2015, as opposed to January 1st, 2015. Additionally, a one-time arrangement in 2014 allows plans to utilize a measuring period of six months, even in relation to a stability period of up to 12 months. This makes it easier for employers new to the shared responsibility provisions to ensure compliance.

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