In today’s challenging business environment, employers can use a little good luck now and then. This year, small employers with fewer than 100 employees are enjoying a little Luck O’ the Irish courtesy of Uncle Sam. That’s because the Employer Shared Responsibility provisions under the Affordable Care Act (ACA) – affectionately known as “pay-or-play” – have been postponed by the IRS from January 1, 2014 until January 1 of this year (see IRS Notice 2013‑45).
That means the IRS won’t be digging into your pot of gold this year for penalties or payments for 2014. That’s welcome news for employers still struggling to adjust to life under the ACA.
The final regulations released on February 10, 2014, give employers transition relief for all employees who would be eligible for coverage as of the first day of the 2015 plan year under the eligibility terms in effect on February 9, 2014. This gives employers with fiscal year plans more time to make sure their plan’s coverage is affordable and provides minimum value. Here are a few of the new transition rules:
- The first new provision applies to employers who offer coverage to most, but not all, of their full‐time employees in 2015. To avoid a penalty for failing to offer health coverage in 2015, employers subject to pay-or-play must offer coverage to 70 percent of their full‐time employees.
- Under the second new provision, new employers who become subject to pay-or-play won’t be assessed any penalties for January through March of their first year of applicability, as long as they offer employee coverage that provides minimum value on or before April 1, 2015.
- If you offered coverage to a full‐time employee no later than the first day of the first payroll period that began in January 2015, the employee will be treated as having been offered coverage for January 2015.
Sizing up your business for 2015
Any employer that employed an average of at least 50 full‐time or full‐time equivalent (FTE) employees on business days during the preceding calendar year is subject to the pay-or-play provisions. Employers are now allowed to determine their status based on a period of at least six consecutive months during 2014 rather than the entire year.
What about medium-sized employers?
Employers with 50-99 full-time or FTE employees won’t be subject to penalties until their first plan year on or after January 1, 2016, as long as they:
- Don’t modify their plan year after February 9, 2014 to begin on a later calendar date
- Don’t reduce workforce or hours of service during 2014 to avoid compliance
- Don’t eliminate or materially reduce healthcare coverage offered on February 9, 2014 through the last day of the 2015 plan year
What about employers with non‐calendar-year plans?
Some employers have plan years that don’t begin on January 1 (known as fiscal year plans), and those employers can now begin compliance with the employer mandate at the beginning of their plan years in 2015 rather than on January 1, 2015.
Use your luck wisely
The ACA has been a whirlwind of new rules and regulations, but at least Uncle Sam has been willing to sweeten the pot a little by postponing certain rules to give businesses more time to adjust. But don’t get complacent. The transition period is the perfect opportunity to assess the challenges you may face in 2016 and consider your compliance strategies.
For more information, see the IRS’ employer shared responsibility page. To keep luck on your side, talk to the risk management experts at Heffernan Benefits Advisory Services about your healthcare benefits plan and complying with the ACA.