In the final regulations issued on the shared responsibility penalties (often referred to as the pay or play penalties), the Departments provided relief for 2015 to employers with between 50-99 full-time equivalent employees. If an employer qualifies for this relief and certifies its eligibility for the relief, it will not be subject to shared responsibility penalties for 2015 (or for the portion of its 2015 plan year that falls in 2016 if it maintains a non-calendar year plan and it qualifies for the non-calendar year transition relief).  An employer is eligible for this transition relief if it meets the following conditions:     

  • The employer had 50 to 99 full-time employees, including full-time equivalent employees, on business days in 2014;  
  • During the period of February 9, 2014, through December 31, 2014, the employer did not reduce the size of its workforce or reduce the overall hours of service of its employees in order to qualify for the transition relief; and  
  • During the period of February 9, 2014, through December 31, 2015, (or, if the employer has a non-calendar-year plan(s)), ending on the last day of the 2015 plan year) the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014.  

This transition relief can be a huge break for employers. However, an employer does not qualify for the relief automatically. The employer must certify that it is eligible for the relief on its Form 1094-C filing. If you are an employer relying on this relief, the company needs to ensure that it indicates that it qualifies for the relief when it files its 2015 Form 1094-C with the IRS by selecting box C  on line 22 of the Form. The company still needs to report to the IRS on Form 1094-C and to its employees on Form 1095-C as the transition relief only provides a pass on the shared responsibility penalties for 2015 and provides no relief to the new ACA reporting requirements. Failing to file Forms 1094-C and 1095-C can result in a penalty of up to $500 per missed return. For more information on the penalties for failing to file returns, please click here.