The Department of the Treasury and Internal Revenue Service, on Feb. 10, 2014, issued final regulations regarding the employer shared responsibility provisions under the Affordable Care Act (ACA). The employer shared responsibility provisions generally require an employer with 50 or more full-time or full-time equivalent (FTE) employees to either offer affordable health insurance coverage to its full-time employees and their dependents or face a penalty.
The recently issued final regulations further extend certain deadlines for compliance with the ACA as well as better define certain classes of employees. The following includes some of the highlights.
The employer shared responsibility provisions will apply, beginning in 2015, to employers with 100 or more full-time employees or FTEs. The provisions will not apply to employers with 50 up to 99 full-time employees or FTEs until 2016.
Employers with 100 or more full-time employees or FTEs that do not have calendar year plans will not be subject to the penalties until the first day of their plan year beginning in 2015, provided that certain requirements are met.
In 2015, to be in compliance, employers will need to cover at least 70 percent of their full-time employees. However, in 2016, employers will need to cover at least 95 percent of their full-time employees to avoid the penalty.
With respect to dependent coverage, the requirement that employers offer coverage to the employees’ dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.
The final regulations provide guidance and clarifications regarding what types of employees may be considered full-time, including the classification of volunteers, treatment of educational employees, students in work-study programs and adjunct faculty. Seasonal workers will generally not be considered full-time if employment is customarily six months or less.
With respect to variable-hour employees, the final regulations provide a list of factors to be used to help determine whether an employee meets the definition of variable-hour employee. These include:
- Whether the employee is replacing an employee who was a full-time employee or a variable-hour employee;
- The extent to which hours of service of employees in the same or a comparable position have varied above or below 30 hours per week; and
- Whether the job was advertised or otherwise communicated as requiring 30 hours or more per week.
Further, the final regulations generally adopted the rules in the proposed regulations that allow employers to use look-back measurement periods to determine full-time status of seasonal employees and variable-hour employees. In addition, the final regulations also add an optional monthly measurement period.
Employer Reporting Requirements
Final guidance on the employer reporting requirements is expected to be issued shortly. The Treasury has indicated that, based upon comments received pursuant to the proposed regulations, the Treasury is aiming to “substantially simplify and streamline the employer reporting requirements.”
Keep in mind that many of the ACA requirements are already in effect in 2014. Further, employers also will want to evaluate their plans and employee numbers now to prepare for 2015 and 2016.