On February 12, 2014, the Treasury Department issued final regulations for the employer shared responsibility (“pay or play”) requirement under the Affordable Care Act (proposed regulations were issued in December of 2012). The regulations provide a large number of clarifications and transition relief – this article highlights several important transition relief provisions that employers should be aware of.

Smaller” applicable large employers get an extra year before the employer mandate penalties apply. The pay or play regulations define “applicable large employer” as an employer who employed an average of at least 50 full-time equivalent employees on business days during the preceding calendar year. The final regulations delay the employer responsibility provisions for employers with full-time equivalent employees until January 1, 2016. Employers with 100 or more full-time equivalent employees must comply with the employer responsibility provisions or pay a penalty starting on January 1, 2015. When determining if they have 100+ full-time equivalent employees for 2015, employers can use a shorter measurement period of at least six consecutive months in 2014 (instead of a year).

For “larger” applicable large employers, 70 is the new 95 until 2016. The proposed regulations required applicable large employers to offer coverage to “substantially all” (at least 95 percent) of their full-time employees and dependents, but in the final regulations this threshold is reduced for 2015. To avoid a penalty for failing to offer health coverage in 2015, such employers must offer coverage to at least 70 percent of their full-time employees and dependents. 95 percent of full-time employees and dependents must be offered coverage in 2016 and beyond. Please note that the part (b) penalty the penalty for offering group health coverage that does not meet the affordability or minimum value requirements – still applies to employers with 100+ full-time equivalent employees in 2015, regardless of whether or not 70 percent of full-time employees have been offered group health coverage.

And 80 is the new 30 in 2015. Under the proposed regulations, the penalty for applicable large employers offering no group health coverage (as long as at least one full-time employee purchases coverage on an exchange and receives a subsidy) was $2,000 x the number of full-time employees, less the first 30. For 2015 only, the final rules provide that the penalty for employers offering no group health coverage to full-time employees will be $2,000 x the number of full-time employees, less the first 80.

Coverage for dependents – you get an extra year if you can show you are trying. The employer mandate requires applicable large employers to offer group health coverage to substantially all full-time employees and their dependents, or face a penalty. The requirement to offer coverage to dependents will not apply in 2015 if the employer can show it is taking steps to offer dependent coverage in 2016. The final rules also clarified that dependents do not include foster children and step children, and that dependent coverage must continue through the last day of the month that contains the dependent’s 26th birthday.