ACA Transition Relief – Employer Mandate

In February of this year (2014), I provided an overview of the IRS’ final regulations pertaining to the Affordable Care Act’s (ACA) employer mandate.
(See – http://sstevenshealthcare.blogspot.com/2014/02/employer-mandate-delay-and-final.html )
Since this is such a confusing provision of the ACA, to say nothing of the fact that there have been not one, but two separate delays of this provision, I decided to recap some of the more pertinent aspects of the final regulations and associated transitional relief.

Readers who are not completely familiar with the employer mandate (also referred to both as – “employer shared responsibility” and “pay or play provision”) can access an overview, in both written and audio formats, by clicking – http://sstevenshealthcare.blogspot.com/2013/06/understanding-employer-shared.html

To access the IRS’ final regulations and associated transitional relief, click – http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act

 

  • There are two separate and distinct employer mandated related penalties, which I refer to as the “tack hammer” and the “sledge hammer”.  Formally, these penalties are referred to by the IRS as the 4980H(a) and 4980H(b) penalties, respectively.  To put it in more simple, if not concerning terms, they are the $2,000 and the $3,000 penalties, respectively.
  • The second of the two issued delays gives employers with fewer than 100 full-time employees an additional year (until 2016) to comply with the employer mandate.
  • For 2015, employers with 100+ full-time employees who are subject to the “sledgehammer”/4980H(a)/$2,000 penalty are allowed to exclude the first 80 rather than 30 full-time employees, for purposes of penalty calculation.
  • Also for 2015, and relating to the penalty addressed in the previous bullet point, employers with 100+ full-time employees will be deemed to have offered coverage to “substantially all full-time employees and dependents” (children under age 26 only), if coverage is offered to at least 70% rather than 95%, of them.  (Note: this aspect of the relief has no affect on the tack hammer/4980H(b)/$3,000 related penalty.)
  • Dependents included in the employer mandate related coverage offering are defined as:
    • children under the age of 26
    • biological or adopted children
    • NOT spouses
    • NOT stepchildren or foster children
  • For penalty calculation purposes, dependent children that meet the definition, are included for the entire month in which they turn 26
  • There is specific transitional relief affecting employers that offer only “employee only” coverage in the 2015 plan year (i.e., dependents are not eligible for coverage),  providing they “take steps toward offering dependent coverage during the year”.
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