The IRS issued final regulations implementing the employer shared responsibility penalties on February 12, 2014.  As promised in an earlier post, I have updated our Checklist for Employers to reflect the final regulations.  Although the Checklist explains many of the transition rules, below is a summary of what I think are two of the most important new rules:

Transition relief for employers with 50-99 employees in 2014:  The large employer penalties will generally apply to employers with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in 2016. This new rule is great news for employers with 50-99 employees in 2014.  Employers must meet very detailed requirements to qualify for this one-year delay, including certifying that they have not laid-off employees to drop below the 100 employee threshold.  See pages 3 to 4 of the Checklist for Employers for more information about this new rule.

Substantially all normally means 95% but means 70% for 2015:  To avoid a payment for failing to offer health coverage, large employers need to offer coverage to substantially all of their full-time employees and their dependents.  In 2015 “substantially all” means 70% and in 2016 and beyond it means 95%.  The proposed regulations used a 95% test, so I was pretty happy to see a 70% test in the final regulations.  Reducing the coverage standard to 70% for 2015 will make it much easier to avoid the subsection (a) penalty in 2015, but employers should recognize that not offering coverage to some full-time employees could result in having to pay a subsection (b) penalty with respect to full-time employees who receive a premium tax credit to help pay for coverage through a Marketplace.