On Monday, February 10, the Treasury Department and Internal Revenue Service issued long-awaited final regulations implementing the Affordable Care Act’s employer shared responsibility rules. Commonly known as the “employer mandate,” the Act provides that applicable large employers may be penalized for failing to offer their full‐time employees an opportunity to enroll in health coverage, or if the coverage offered is unaffordable or does not provide minimum value. (Applicable large employers are those who employed an average of at least 50 full-time employees on business days during the preceding calendar year, and employers with fewer employees are not subject to the employer mandate rules.)
Originally slated to become effective January 1, 2014, the Treasury Department and IRS issued proposed regulations in December 2012. A few months later, though, the White House announced a one-year delay in enforcement of the employer mandate. For the most part, the 227-page final regulation should adopt the earlier proposed rules, though not without a few notable changes:
- One-year delay for midsize employers. The employer mandate will only apply to employers with 100 or more full-time employees in 2015. Employers with between 50 and 99 full-time employees won’t have to comply with the employer mandate until 2016, although they will have to certify that they are not cutting employees or reducing hours for purposes of falling below the 100 employee mark.
- Relaxed requirement for very large employers. The proposed regulations required applicable large employers to offer coverage to at least 95 percent of full-time employees to be considered compliant with the employer mandate. The final regulations relax the requirement, phasing in the percentage of full-time employees that must be offered coverage from 70 percent in 2015 to 95 percent in 2016 and beyond.
- Volunteers not counted as full-time employees. There had been some debate in Washington over whether volunteers (particularlyvolunteer firefighters and emergency responders) would count as full-time employees. Commenters explained that volunteer service would be discouraged if employers were required to count volunteer hours when determining whether individuals are full-time employees. Therefore, the final regulations clarify that service hours do not include hours worked as a “bona fide volunteer.”
- Other. There are several smaller adjustments. Many of the fine-tunings relate to how employers are required to calculate employee work hours. Seasonal employees, student work-study programs, adjunct faculty, and other employment situations present unique challenges, which the final regulations address.
Click here for the Treasury Department’s press release.