As previously reported, on Monday, February 10, 2014, the IRS released final regulations on the Affordable Care Act’s (ACA) employer “shared responsibility” provisions, also known as the “pay-or-play” mandate. While the final regulations have (predictably) received mixed reviews, some employers – most notably those with 50 to 99 employees or those that covered almost but not quite 95% of their full-time employees – were likely pleased with at least some of the provisions.

A review of the final regulations shows that there is another group with something to celebrate, at least for now – employers contributing to multiemployer plans. The final regulations contain interim guidance that largely mimics and extends a special transition rule contained in the preamble to the proposed regulations. This rule, which previously only applied in 2014, simplified compliance with the pay-or-play mandate for employers with collectively bargained employees for whom contributions are made to a multiemployer plan. It was unclear whether this interim guidance would be extended.

Specifically, the interim guidance provides that an employer that is required by a collective bargaining (or participation) agreement to contribute to a multiemployer plan will not be treated, with respect to employees for whom the employer is required to contribute to the plan, as failing to offer full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage (i.e., for the purposes of the “4980H(a) penalty” which may apply if an employer does not offer a specified percentage of its full-time employees (and their children) insurance coverage) and will not be subject to a penalty for failing to offer affordable, minimum value coverage (i.e., for the purposes of the “4980H(b) penalty” which may apply if an employer does not offer affordable coverage that reimburses claims at least at a 60% level — so-called, minimum value coverage — to its full-time employees) as long as the following conditions are met:

  • the multiemployer plan offers dependent coverage;
  • the multiemployer plan provides minimum value coverage;
  • and the coverage is affordable.

Like the preamble to the proposed regulations, the preamble to the final regulations provides that employers can treat multiemployer plan coverage as affordable using any of the safe harbor tests set forth in the final regulations (i.e., the “Rate of Pay,” “W-2” or “Federal Poverty Level” safe harbors). In addition, coverage is affordable if the employee’s required contribution toward self-only coverage does not exceed 9.5% of the wages reported to the multiemployer plan (using actual wages or an hourly wage rate under the agreement requiring contributions).

Why is this so significant if there is still a dependent coverage, affordability and minimum value requirement? Absent this guidance, there was concern that employers would question their participation in multiemployer plans because they had no control over whether their full-time employees were actually offered coverage by the multiemployer plan. However, the interim guidance now provides that an employer is treated as offering coverage for all employees for whom it is required to contribute to the multiemployer plan, even those full-time employees who never satisfy that plan’s eligibility rules and therefore are never offered coverage.

While this solves a key concern, employers may still wish to take steps to ensure that the interim guidance applies. For example, employers would be wise to confirm with the multiemployer plans to which they contribute that those plans offer dependent coverage, provide minimum value and are affordable.

The other piece of good news is that this is not a rule we expect to last only a year, unlike the transition rule in the proposed regulations, which only applied in 2014. The preamble to the final regulations provides that employers can rely on the interim guidance until it is modified. In addition, any future guidance that limits the scope of the interim guidance will apply no earlier than January 1 of the calendar year that is at least six months from the issuance of the new guidance. While a more permanent rule would certainly be preferable, the extension of this rule beyond one year provides employers with somewhat greater comfort as they enter into collective bargaining agreements, which typically extend beyond one year.