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Many businesses have had the Affordable Care Act on the forefront of their minds within the past year. Bracing for the impacts the new law will have, business owners across the board are still attempting to navigate what the law will mean and when it will affect them.
Local insurance consulting firm, Montgomery & Graham provides insight into the latest updates surrounding the new law.
The Affordable Care Act (ACA) imposes a penalty on large employers that do not offer minimum essential coverage to full-time employees and their dependents. Large employers that offer this coverage may still be liable for a penalty if the coverage is unaffordable or does not provide minimum value. The ACA’s employer mandate provision is often referred to as the “employer shared responsibility” or “pay or play” rules.
On Feb. 10, 2014, the U.S. Treasury Department released final regulations implementing the employer shared responsibility provisions of the ACA. The regulations are effective upon publication in the Federal Register.
According to the Departments, approximately 96 percent of employers are small businesses that have fewer than 50 workers and are exempt from the employer responsibility provisions. The employer shared responsibility provisions apply only to applicable large employers that have 50 or more full-time employees.
The final rules will delay implementation for medium-sized employers that are covered by the employer mandate. Applicable large employers that have fewer than 100 full-time employees will have an additional year, until 2016, to comply with the pay or play rules.
Thus, the employer shared responsibility provisions will generally apply to:
To qualify for this delay, the employer must provide an appropriate certification as described in the final rules.
In addition to the two forms of 2015 transition relief noted earlier, a package of limited transition rules that applied for 2014 under the proposed regulations is extended to 2015 under the final regulations, including:
As these limited transition rules take effect, the Treasury and the IRS will consider whether it is necessary to further extend any of them beyond 2015.
Under the proposed rules, applicable large employers would need to offer coverage to at least 95 percent of their full-time employees to avoid the most significant penalties. The final rule provides transition relief that will phase in this requirement over two years, beginning in 2015.
To avoid a payment for failing to offer health coverage in 2015, applicable large employers will need to offer coverage to 70 percent of their full-time employees.
In 2016 and beyond, applicable large employers will need to offer coverage to 95 percent of their full-time employees to avoid these penalties.
This rule is intended to provide relief to employers that, for example, may offer coverage to employees working 35 or more hours per week, but not yet to those employees who work 30 to 34 hours per week.
The final regulations provide clarifications—many of which are based on comments on the proposed regulations—regarding whether employees of certain types or in certain occupations are considered full-time.
Like the December 2012 proposed regulations, the final rules allow employers to use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonal employees are full-time.
In responding to comments, the final regulations also clarify the application of this method and the alternative monthly method of determining full-time status.
Like the proposed regulations, the final rules provide safe harbors that employers can use to determine whether the coverage they offer is affordable to employees.
These safe harbors permit employers to use the wages they pay, their employees’ hourly rates, or the federal poverty level in determining whether employer coverage is affordable under the ACA.
Many comments on the proposed employer information reporting regulations have urged that final rules provide streamlined ways to comply with employer information reporting—especially for employers that offer highly affordable coverage to all or virtually all of their full-time employees.
Others have asked for a single form for employer and insurer reporting provisions when possible. The Treasury and the IRS will issue final regulations shortly that aim to substantially simplify and streamline the employer reporting requirements.
For more information on the employer shared responsibility regulations, see the most recent IRS Questions and Answers.
Source: U.S. Treasury Department