Employer Mandate – Delay and Final Regulations


This past Monday (February 10, 2014) the Treasury Department issued long awaited FINAL REGULATIONS pertaining to the Affordable Care Act’s (ACA) “employer mandate”, aka “employer shared responsibility”; or “pay or play”.  There is a great deal of information and guidance contained in these regulations, thus, I will not attempt to address all of it in this post.  Rather, I’ll provide some of the highlights, and embed some links to direct you to more comprehensive details.  To review what, how, and whom the employer mandate affects, click – http://sstevenshealthcare.blogspot.com/2013/06/understanding-employer-shared.html

It is imperative that readers/stakeholders understand there are two (2) aspects to this release:

1. A delay of the employer mandate for otherwise affected employers with 50-99 full-time employees until – “the first plan year beginning on or after JANUARY 1, 2016”.
(IMPORTANT: Employers eligible/affected by this additional, one year delay will need to certify they are not reducing the number of full-time employees employed merely to take advantage of the delay); and
2. Guidance to assist businesses that must comply with the mandate in 2015 and beyond.

Employers with 100 or more full-time employees were provided with additional guidance pertaining to phasing in the employer mandate in 2015 and 2016.  Such employers will not face penalties if they offer coverage to 70% of their full-time employees and dependents* under the age of 26 in 2015. Such employers will need to offer coverage to 95% of full-time employees and dependents* under the age of 26 beginning in 2016.
*Note: The full-time employee definition remains 30 hours or more per week; and the definition of dependent has been revised to exclude stepchildren and foster children, and continues to exclude spouses.

Additional aspects of the final regulations include:

Extension of Transition Relief for 2015
The final regulations extend transitional relief in several ways, including:

  • Employers (100+) with non-calendar-year plans must comply with the employer mandate as of “the beginning of the first plan year on or after January 1, 2015″.
  • The requirement to offer dependent coverage will not apply in 2015 to employers that are taking steps to offer dependent coverage by 2016.
  • Employers can use a six-month “look back” period to determine whether they had at least 100 full-time or full-time equivalent employees in the previous year, which corresponds with the phasing in of the penalties.
  • In 2014, employers may use a six-month measurement period to determine the stability period during which employees with variable hours must be offered coverage.
  • There was relief for 2014 allowing employer plans to recognize the individual mandate and the availability of coverage through the Exchanges/Marketplaces as an allowable Flex/Section 125 life status event. This particular relief has not been extended into 2015.

Full-Time and Part-Time Employee Definitions
The regulations clarify the methods employers can use to determine whether employees are full-time or part-time; and address these specific situations:

  • Bona fide volunteer workers for government and tax-exempt entities, such as firefighters and emergency responders, are not considered full-time employees.
  • Teachers and other education employees are considered full-time employees even if they don’t work full-time year-round.
  • Seasonal employees who work six months or less are not considered full-time employees, including retail workers employed exclusively during holiday seasons.
  • Schools with adjunct faculty may credit 2¼ hours of service per week for each hour of teaching or classroom time.
  • Work done by students in federal or state-sponsored work-study programs will not be counted in determining if they are full-time employees.

Safe Harbors for Affordability Determination

The regulations confirm that employers can use W-2 wages, hourly rates or the federal poverty level to determine whether the coverage they offer is considered “affordable” for penalty purposes. If  the W-2 safe harbor is used, full W-2 wages must be used and cannot be reduced for salary reduction elections under 401(k) retirement plans or Section 125/cafeteria plans.

To access the Department of Treasury Fact Sheet on these final regulations, click – http://www.treasury.gov/press-center/press-releases/Documents/Fact%20Sheet%20021014.pdf

To access a copy of the actual regulations, click – http://www.cignaproducer.com/pdf/Employer_Mandate_Final_Reg_02-10-14.pdf