In February 2014, the Department of the Treasury issued the long awaited final regulations pertaining to the employer mandate provisions of the Affordable Care Act (ACA). On March 5, final regulations on the annual information reporting requirements were released. Both the employer mandate and the annual information reporting requirements, which were previously delayed from their original effective date of January 1, 2014, become effective January 1, 2015 for employers with at least 100 full-time equivalent employees.
THE BOTTOM LINE
The employer mandate and reporting requirements take effect January 1, 2015. The final regulations are complicated, and employers have several options when deciding how to comply with both the employer mandate and the reporting requirements. Because there are important legal considerations, employers should consult with their legal counsel now to discuss which options work best for the employer and to finalize their compliance strategies for ACA compliance in 2015 and beyond
The final employer mandate and information reporting requirement regulations contain a number of important clarifications, although much of the prior regulatory structure remains in place. Of particular note is the additional transition relief available to certain employers for 2015, including those with less than 100 full - time equivalent employees.
WHAT’S STILL IN PLACE
The ACA employer mandate provisions remain largely unchanged. Since its introduction in 2010, the ACA has prompted the government to issue various guidance in order for employers and insurers to understand how to properly comply with two of the ACA’s key provisions: the employer mandate, which potentially penalizes employers for not offering a minimum standard of affordable health care coverage to full-time employees, and the annual information reporting requirements.
The regulations provide clarification on several important issues, many of which are based on comments on the proposed regulations, including:
- Determining large employer status;
- Determining full-time employment status by either the monthly measurement method or look-back measurement method;
- Defining which hours of service must be counted for purposes of determining full-time employment status;
- Special rules for seasonal workers, variable hour employees and employees hired through staffing agencies; and
- Special rules for employers in certain industries (e.g., educational institutions and staffing agencies).ERT
The final regulations also provide certain transition relief for 2015, including:
- Delay for smaller “large employers” until 2016. Employers with 50-99 full-time equivalent employees will not be subject to the employer mandate until January 1, 2016, assuming certain conditions are met.
- Reduced Coverage Requirements. Employers with 100 or more full-time equivalent employees must only offer coverage to at least 70 percent of their full-time employees in 2015, as opposed to 95 percent in 2016, to satisfy one part of the employer mandate. However, this does not exempt employers from all ACA penalties.
- Shorter “look-back” period for 2015. Employers are permitted to use a look-back measurement period as short as six months for the stability period beginning in 2015.
- Non-Calendar Year Plans. Employers with non-calendar year plans are not required to comply with the employer mandate in 2015 provided certain conditions are met.
- Dependent Children. Employers will not be penalized for failure to offer coverage to dependent children in 2015, assuming certain conditions are met.
The regulations substantially streamline reporting requirements for most employers, including the following adjustments from the proposed regulations:
- Employers that self-insure are able to take advantage of a single, consolidated form to satisfy the reporting obligations to both the Internal Revenue Service and employees, therefore satisfying the requirements under Internal Revenue Code Sections 6055 and 6056 at the same time; and
- Employers that provide a “qualifying offer” to any of their full-time employees can take advantage of simplified reporting requirements for those employees.
- A qualifying offer is an offer of minimum value coverage that provides employee-only coverage at a cost to the employee of no more than approximately $1,100 in 2015 (essentially 9.5 percent of the Federal Poverty Level), combined with an offer of coverage for the employee’s family.
- For employees who receive a qualifying offer for the full 12 month calendar year, an employer will only need to report the name, address and taxpayer identification number for those employees, along with a statement that the employee received a qualified offer.
- For 2015, employers who certify that they have made a qualifying offer to at least 95 percent of their full-time employees will be able to use the simplified reporting method for their entire workforce, including those employees who did not receive a qualifying offer.
- An employer who certifies that it has made a qualifying offer of MEC to at least 98 percent of the employees on whom it reports information under Code Section 6056 will be able to report without separately identifying full-time employees.
While the final reporting requirement regulations provide several streamlined reporting methods, employers will still need to closely review both sets of requirements.
- Unless an employer can take advantage of certain alternative reporting methods, employers will need to report under the general method which requires employers to identify all full-time employees.
- This requirement may pose a problem for employers that have not historically tracked hours of service or have had difficulty tracking hours and such employers may need to revisit their approach to compliance.
Employers should take steps now to prepare for compliance in 2015. Employers should consult with their legal counsel to take a number of steps, including the following:
- Determine whether the employer is an “applicable large employer” and therefore subject to the employer mandate, including identifying all entities in the employer’s controlled group;
- Determine if the employer will comply with the employer mandate by exploring health insurance plan options and associated costs, including the use of “skinny” or bronze plans;
- Determine whether the employer will use the monthly measurement method or look-back measurement method to count hours to determine who its full-time employees are;
- Ensure all independent contractors are properly classified and review the rules for counting hours of specific employees such as seasonal employees, variable hour employees, employees on Family and Medical Leave, and rehires;
- Review all health plans that will be offered to ensure plans are affordable and meet the minimum value requirements;
- Review the employer’s method for tracking employee hours of service and determine the appropriate information reporting method; and
- Determine if the employer can take advantage of any available transition rules.