Thirteen months after proposing regulations under the Patient Protection and Affordable Care Act (“ACA”), the Internal Revenue Service issued final regulations yesterday that are intended to confirm what will be expected of certain large employers under the ACA’s “shared responsibility” – a/k/a “employer mandate” – rules.
Thirteen months after proposing regulations under the Patient Protection and Affordable Care Act (“ACA”), the Internal Revenue Service issued final regulations yesterday that are intended to confirm what will be expected of certain large employers under the ACA’s “shared responsibility” – a/k/a “employer mandate” – rules. In the Final Rule, the IRS responded to the hundreds of public comments it received on the proposed regulations and made some revisions and clarifications, but the mandates and penalty structures laid out in the proposed regulations largely remain in place subject to some significant “transition relief” afforded to smaller employers. The Final Rule becomes effective on February 12, 2014.
Additional “Transition Relief”
The proposed regulations required all employers with an aggregate of 50 or more full-time and full-time equivalent employees to offer “minimum value” and “affordable” health insurance coverage to at least 95% of their full-time employees and their dependents (the “Employer Mandate”) beginning January 1, 2014.
However, in July 2013, the IRS issued a notice providing that, as “Transition Relief,” the Employer Mandate would not be enforced for calendar year 2014, and therefore employers effectively would not need to satisfy these requirements until January 1, 2015.
Delay of Offer of Coverage Requirement (Employers with 50-99 Full-Time & FT Equivalent Employees)
For calendar year 2015, the Employer Mandate will not be enforced against employers meeting the following qualifications:
Phase-In of Enforcement of Offer of Coverage Requirement
All Employers Required to Offer Coverage to during 2015
Under the proposed regulations, an employer subject to the Employer Mandate would be assessed a penalty for failure to offer minimum value, affordable coverage to 95% of its full-time employees and their dependents. As transition relief provided under the Final Rule, for 2015 only, employers will be assessed a penalty for failing to offer minimum value, affordable coverage to at least 70% of its full-time employees and their dependents.
Employers with 100 or More Full-Time and Full-Time Equivalent Employees
The penalty calculation for failing to offer coverage to at least 70% of full-time employees excludes the first 30 full-time employees. As transition relief provided under the Final Rule, for 2015 only, the penalty assessed against employers for failing to offer minimum value, affordable coverage to at least 70% of its full-time employees and their dependents will exclude the first 80 full-time employees.
Other Issues Addressed
Volunteers
The Final Rule provides that service performed by a “bona fide volunteer” for a governmental entity or a §501(c) tax-exempt organization do not count as employee hours of service for purposes of the ACA Employer Mandate. The “bona fide volunteer” must not receive or be entitled to receive compensation in exchange for the performance of services, but may receive reimbursement for reasonable expenses, reasonable benefits and nominal fees
Student Workers
In the Final Rule, service performed by a student in positions subsidized through the federal work study program or a substantially similar program of a State or political subdivision does not count as employee hours of service for purposes of the ACA Employer Mandate.
Seasonal Employees
The Final Rule provides a definition of “seasonal employee” for purposes of determining whether the employee is full-time and therefore must be offered coverage. “Seasonal employee” is defined as one who is hired into a position for which the customary annual employment is 6 months or less, and employers should use the “look-back measurement” method of calculating these employees’ hours in order to determine whether they worked full-time.
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