Final regulations on the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (PPACA) were issued on February 10 by the Treasury Department.
As a reminder, the “employer mandate” applies to employers with 50 or more full-time employees or full-time equivalents and requires that employers offer “affordable” (costing no more than 9.5 percent of an employee’s wages) and “minimum value” (covers 60 percent or more of total covered costs) coverage to full-time employees working at least 30 hours a week and their dependent children up to age 26.
The final employer mandate regulations that we’ll cover in this update include:
- Phasing in the “employer mandate” by employer size
- Extending transitional relief
- Defining full- and part-time employees
- Safe harbors for determining if coverage is affordable
- Provisions for new businesses and new employees
Phasing in the Mandate
The final regulations call for a phasing in of the employer mandate based on employer size.
Employers with 50 to 99 full-time employees: These employers will not face penalties for not offering coverage to full-time employees and their dependents up to age 26 until the first plan year beginning on or after January 1, 2016. Employers must certify that they are not reducing the size of their workforce to stay below 100 employees.
Employers with 100 or more full-time employees: Employers will not face penalties if they offer coverage to 70 percent of their full-time employees in 2015. They must offer coverage to 95 percent of full-time employees beginning in 2016.
The definition of full-time employee remains at 30 hours or more per week. The definition of dependent was revised to exclude stepchildren and foster children. It continues to exclude spouses.
Extending Transitional Relief
The final regulations extended transitional relief, allowing employers with non-calendar year plans to comply with the employer mandate as of the beginning of the first plan year starting after January 1, 2015. As long as employers are taking steps to offer dependent coverage by 2016, they will not be required to offer dependent coverage in 2015.
Meanwhile, employers can use a six-month “look back” period to determine whether they had at least 100 full-time equivalent employees in the previous year. This aligns with the phasing in of penalties. In 2014, employers may use a six-month timeframe to determine the stability period during which employers with variable hours must be offered coverage.
Relief for 2014 allows employer plans to recognize the individual mandate and the availability of coverage through health care exchanges as an allowable Section 125 life status event. This relief was not extended into 2015.
Defining Full- and Part-Time Employees
The regulations clarify what “full-time” and “part-time” employee means, while addressing special circumstances such as volunteer and seasonal workers.
Volunteers workers for government and tax-exempt entities (firefighters, emergency responders) are not considered full-time employees.
Teachers and education employees are considered full-time even if they do not work year-round.
Seasonal employees who work six months or less are not full-time employees, and that includes retail workers employed during the holidays.
Schools with adjunct faculty may credit 2¼ hours of service per week for each hour of teaching or classroom time.
Work completed by students in federal or state-sponsored work-study programs is not counted in determining whether they are full-time employees.
Determining Whether Coverage is Affordable
The regulations put into place safe harbors for determining the affordability of coverage, allowing employers to use W-2 wages, hourly rates or the federal poverty level as measures. If using the W-2 safe harbor, full W-2 wages must be used with no reductions for 401(k) plan or cafeteria plan contributions.
New Businesses and New Employees
Newly established employers who were not in business last year should determine whether they are a “large employer” based on the average number of employees they reasonably expect to employ on business days in the current year.
Employers are not subject to a penalty for the first three months of a new employee’s employment if coverage is offered no later than the first day of the fourth month of employment.
Now is a dynamic time in health insurance reform and Marsh & McLennan Agency formerly Benefits Resource Group is here to guide you through new regulations for the employer mandate. We encourage you to contact Ross W. Farro, a Principal with Marsh & McLennan Agency formerly Benefits Resource Group. Contact him by phone at 216-393-1820 or by email at email@example.com .