February 14, 2014
US Treasury Issues Final Regulations Implementing the Employer Shared Responsibility Provisions Under the Affordable Care Act
On February 10, 2014, the U.S. Treasury and the Internal Revenue Service ("IRS") issued final regulations that implement the Employer Shared Responsibility provisions under the Affordable Care Act ("ACA"). The most significant provisions in the final regulations are a one-year delay of the employer mandate for midsize employers and a phased-in coverage requirement for large employers.
New Guidance. The new final regulations issued on February 10th delay the applicability of the employer mandate to mid-sized employers (i.e., those with between 50 and 99 full-time employees) until 2016, provided that the employer meets certain requirements. They also provide a "phase-in" rule for large employers (i.e., with 100 or more full-time employees) under which an employer won't owe a penalty for failing to offer health coverage so long as it offers coverage to at least 70% of its full-time employees in 2015, and 95% in 2016.
Background. Beginning after Dec. 31, 2013, an applicable large employer is liable for an annual assessable payment if any full-time employee is certified to the employer as having bought health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee, and either the employer:
(1) fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; or
(2) offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that either is unaffordable or does not provide minimum value as defined under the ACA.
Together these provisions are referred to as the "Employer Shared Responsibility" provisions or the "Employer Mandate."
The payment assessed under (1) above is equal to the number of all (excluding the first 30) full-time employees multiplied by one-twelfth of $2,000 for each calendar month, while the payment assessed under (2) above is equal to the number of full-time employees who are certified to receive an applicable premium tax credit or cost-sharing reduction multiplied by one-twelfth of $3,000 for each calendar month. In no case, however, may the liability under (2) above exceed the maximum potential liability under (1) above.
Under ACA, a full-time employee for any month is an employee who is employed on average at least 30 hours of service per week. An applicable large employer for a calendar year is an employer who employed an average of at least 50 full-time employees on business days during the preceding calendar year.
In late December of 2012, the IRS issued proposed reliance regulations, along with Questions and Answers (Q&As), that provided guidance on the implementation of the employer mandate. In July of 2013, the IRS issued Notice 2013-45, 2013-31 IRB 116, which delayed the employer mandate until 2015 and provided transition relief for 2014 from certain related information reporting requirements.
According to a release from the US Treasury Department on February 10th, the final regulations issued constitute a step in the Treasury's aim of continuing to make the compliance process under the ACA "simpler and easier to navigate."