Employers can breathe a sigh of relief as key provisions of the employer shared responsibility under the Patient Protection and Affordable Care Act (PPACA) are delayed to January 2015, with added transitional relief extending to 2016 for some employers.
Marking the second delay of the effective date of the key provisions of the PPACA, the Obama administration recently announced a partial delay of the Act’s employer shared responsibility mandate, pushing the effective date of the “play or pay” provision to January 2015. The shared responsibility requirements apply to “large employers” with 50 or more “full-time equivalent employees” working an average of 30 hours per week. As of January 2015, employers that fail to provide employees with qualifying healthcare coverage will face significant penalties.
Additionally, final regulations for the implementation of the employer shared responsibility provisions were issued by the Internal Revenue Service on February 9, 2014. These provide some additional transition relief, delaying the application of the employer shared responsibility mandate to January 2016 for employers with an existing workforce of 50 to 99 full-time equivalent employees that do not eliminate or materially reduce the health coverage offered as of the February 9, 2014. The final regulations contain additional clarifications on the implementation of the shared responsibility rules intended to facilitate phase-in and assist employers with compliance. Further still, the final regulations include definitions of full-time employees and hour of service, imposing detailed rules for measuring hours of service as well as the application of the rules to various employee categories, such as volunteers, educational employees, adjunct faculty and seasonal employees.
In addition, the final regulations reduce the percentage, from 95 to 70, of full-time employees that must be offered qualifying coverage by the first payroll period of 2015 to avoid penalties of $2,000 per year per full-time employee if at least one full-time employee purchases subsidized coverage through the exchange. While under the statute and proposed regulations the first 30 employees were disregarded for purposes of calculating this penalty, the first 80 employees will be disregarded for 2015 as part of the transitional relief provided under the final regulations. The final regulations also clarify that coverage offered by employee staffing firms to an individual performing services for a client-employer deemed to be the individual’s common law employer will be treated as being provided by the client-employer, so long as the fee paid by client-employer to the staffing firm is higher than if the employee had not enrolled in such coverage.
It is essential that employers familiarize themselves and comply with the PPACA’s detailed requirements so as to minimize liability for penalties which the IRS will begin assessing in 2015. Employers using staffing agencies, in particular, should ensure their contracting agreements require the agency to offer qualifying coverage to agency employees who work full time on behalf of the client and that fee arrangements for such employees reflects as much. We can help you navigate these complex requirements, implement the necessary strategies to identify the gaps and ensure timely compliance with the employer mandate.