The mandate for some employers to provide affordable health insurance coverage to workers will take effect in the near future. However, for some firms, it will be a case of later rather than sooner.
Background:Under the Patient Protection and Affordable Care Act of 2010 (the PPACA), an employer with 50 or more full-time employees (FTEs) must provide minimum essential health care insurance to eligible employees or risk being penalized. The annual penalty is $2,000 per employee (calculated on a monthly basis). For this purpose, an FTE is someone working an average of 30 or more hours per week.
Initially, this requirement was scheduled to take effect on January 1, 2014 (coinciding with the requirement for individuals to obtain health insurance coverage). However, in 2013 the government postponed the deadline for one year, to January 1, 2015.
The new regulations clarify the rules for small-business employers of fewer than 50 FTEs, medium employers with between 50 and 99 FTEs, and large employers with 100 or more FTEs.
- Small employers: These employers continue to be exempt from the employer mandate. In addition, the new regulations state that small employers don’t have to fill out any forms relating to the PPACA. Note: The smallest employers represent an overwhelming majority (approximately 96%) of all the nation’s firms.
- Medium employers: This group will benefit from a second delay of the mandate. They do not have to comply with the rules until January 1, 2016, but must certify that they did not reduce their workforce to below 100 FTEs to qualify for the exemption.
- Large employers: Although large employers still face a January 1, 2015, deadline for the mandate, there is some relief. These employers were supposed to provide coverage to 95% of their full-time employees in 2015. However, under the final regulations, the standard is lowered to 70% in 2015 before increasing to 95% in 2016.
The final new regulations provide guidance in several other areas. Here are some of the highlights:
- The definition of FTE is clarified. For instance, most seasonal workers who work for an employer for six months or less during the year will not be treated as FTEs.
- As stated in previously issued proposed regulations, employers may look back to the prior year (i.e., “a lookback rule”) to help determine whether employees should be treated as FTEs.
- The final regulations incorporate several safe harbor provisions in the proposed regulations that make it easier to determine if coverage is affordable to employees.
- Under the new final regulations, employers may determine whether they had at least 100 FTEs in the previous year by referring to a six-month period instead of an entire year.
- Finally, the regulations include several other transitional rules.
Other changes pertaining to the PPACA may be implemented before January 1, 2015. We will keep you posted on any important developments.