The U.S. Treasury Department has issued final regulations implementing the employer shared responsibility provisions, also referred to as the play-or-pay penalties, under the Patient Protection and Affordable Care Act (ACA) beginning in 2015. The final rules provide some transition relief for 2015, including a delay in compliance for certain midsize employers and a reduction in the number of covered employees that must be offered coverage.

Compliance Delay for Midsize Employers

The employer shared responsibility provisions generally apply to employers with at least 50 full-time employees during the preceding calendar year. However, starting in 2015, the provisions will apply only to employers with 100 or more full-time employees. For employers with 50 to 99 full-time employees, the shared responsibility provisions will become effective starting in 2016.

In order to qualify for the 2015 transition relief, employers with 50 to 99 full-time employees must certify to the Internal Revenue Service that they meet the requirements for transition relief, including that they have not reduced the size of their workforce or the overall hours of service of their employees in order to qualify for transition relief and that they have not eliminated or reduced previously offered health coverage. This certification will be made in a form to be prescribed in later guidance on the annual coverage reporting requirements under Section 6056 of the Internal Revenue Code.

The final rules allow employers to determine whether they had 100 full-time employees in the previous year by referring to a six-month period instead of a full year. Employers generally are required to include full-time-equivalent employees in determining the employee threshold.

Minimum Coverage Relief for All Employers

Under the ACA, employers that are subject to the employer responsibility provisions must offer coverage to 95 percent of their full-time employees as one of the conditions for avoiding the assessable penalty payment for failing to offer coverage. However, for 2015, employers are required only to offer coverage to at least 70 percent of their full-time employees to avoid the penalty. Beginning in 2016, employers will have to offer coverage to at least 95 percent of their full-time employees.

Effective Date

For calendar year plans, the transition relief takes effect January 1, 2015. For noncalendar year plans, compliance with the mandate and the aforementioned transition relief begins at the start of the plan year starting in 2015.