IRS Final Regulations on Employer Shared Responsibility Released
On February 10, 2014, the United States Department of Treasury issued its final rules concerning the shared responsibility requirements for employers regarding health coverage under the Affordable Care Act. Although these regulations affect numerous aspects of health care reform and its applicability to various employers, I have identified some of the most important changes that employers should be aware of:
1) Large Employer Mandate Delayed (50-99 Employees, including full-time equivalent employees): The shared responsibility requirements for large employers, also known as “Pay or Play,” have been further delayed for some large employers. Employers with 50 to 99 employees (including full-time equivalent employees (“FTEs”)) will not be penalized for failing to provide health insurance to their full-time employees until 2016. Before this change, employers with 50 to 99 employees (including FTEs) were required to provide health insurance to their full-time employees starting in 2015 or face penalties.
2) Large Employer Mandate Modified (100+ Employees, including full-time equivalent employees): The shared responsibility requirements for employers with over 100 employees (including FTEs) have also been changed. Now, these employers are only required to provide adequate and affordable coverage to 70% of their full-time employees in 2015. In 2016, these employers must provide appropriate coverage to 95% of their full-time employees. Before this change, the requirement to provide appropriate coverage to 95% of full-time employees was slated to take effect in 2015.
3) “Pay or Play” Penalties Modified for 2015: For 2015 plus any calendar months of 2016 that fall within the employer’s 2015 plan year, if a 100+ FTE Employer is subject to the “Pay or Play” penalties for failing to provide health insurance coverage to its full-time employees, the employer must pay a penalty equal to: $2,000 x (# of full-time employees – 80). Before this change, the employer only received a 30 full-time employee reduction to the “no coverage” penalty, instead of 80. Starting in 2016, all large employers that fail to provide health insurance to their full-time employees will only receive a 30 full-time employee reduction to the “no coverage” penalty.
4) Seasonal Employees Redefined: The definition of seasonal employees has been expanded to include workers in a position for which the customary annual employment period is 6 months or less. Prior to this change, seasonal employees were those individuals that worked 120 days (roughly 4 months) or less during the year.
5) Certain Hours of Service Performed by Members of Religious Orders are Exempt: In determining whether its members are full-time employees, a religious order is permitted to not count the hours of service related to any work performed by an individual who is subject to a vow of poverty as a member of that order when the work is in the performance of tasks usually required for active members of the order.
6) Bona Fide Volunteers Do Not Count: Government entities and 501(c) organizations with tax-exempt volunteers do not need to count the hours of service provided by bona fide volunteers when determining their status as a large or small employer under the ACA.
7) Work Study Program Student Employees Do Not Count: Educational institutions do not need to count the hours worked by students that are employed in positions subsidized through the federal work study program or a substantially similar program at the State or local level in determining whether they are a large or small employer under the ACA. However, the hours worked by students employed outside of these programs must be counted by the educational institution to determine whether it is subject to the shared responsibility requirements of the ACA.
8) Approved Methodology for Determining Adjunct Faculty Hours: Institutions that employ adjunct faculty are required to use a reasonable method to identify and track the hours of service for adjunct faculty. The IRS has identified one method that it deems reasonable. The institution must credit the adjunct faculty member with: (a) 2 ¼ hours of services per week for each hour of teaching or classroom time (this would add an addition 1 ¼ hours for activities such as class preparation and grading) and, separately (b) an hour of service per week for each additional hour outside of the classroom that the faculty member spends performing duties required to perform (office hours and faculty meetings).
To find out more about the Employer Shared Responsibility Requirements, “Pay or Play” Mandate, or how the final regulations impact employers and your business, contact attorney Michael James at email@example.com, 810-936-4040 or www.michaeljameslaw.com. Michael James provides representation and counseling related to all facets of business enterprise and health care matters.
© 2014 Michael P. James, J.D., M.B.A., CSSGB