Employer Mandate Compliance: IRS Issues Q & A Part 2

Our efforts to help you understand the Feb 10 final rules on “Employer Shared Responsibility” continue here with excerpts and commentary on the IRS Q&A, including on Transition Relief for 2015. For information about the penalties as described in the IRS Q&A, please see Part 1 of this blog series.

Transition Relief for 2015—

• Employer Shared Responsibility provisions are effective for 2015;
• Employers will not be subject to a potential Employer Shared Responsibility payment until the first day of the 2015 plan year;
• An employer that takes steps during its 2014 plan year toward offering dependent coverage will not be subject to an Employer Shared Responsibility payment solely on account of a failure to offer coverage to dependents for plan year 2015, i.e., temporary relief for dependent coverage.
• For employers with fewer than 100 full-time employees in 2014 no Employer Shared Responsibility payment will apply for any calendar month during 2105;

What percent of an employer’s full-time workforce must be offered coverage in plan year 2015?

• For 2015, an employer that had at least 100 full-time employees in 2014…will be liable for an Employer Shared Responsibility payment only if:
  • the employer does not offer coverage or offers coverage to fewer than 70% of its full-time employees and (unless the employer qualifies for 2015 dependent coverage temporary relief) the dependents of those employees, and at least one of those full-time employees receives a premium tax credit subsidy to help pay for exchange coverage (“Greater Penalty”); OR
  • the employer offers health coverage to at least 70% of its full-time employees and dependents (see transition relief for 2015), but at least one full-time employee receives a premium tax credit subsidy, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered to that employee was either unaffordable or did not provide minimum value. (“Lesser Penalty”)
  • (In other words, in 2015 if an employer offers coverage to 75% of its full-time employees, but one of the employees in the 25% category not offered coverage qualifies for a premium tax credit subsidy for exchange coverage, the employer potentially will be liable for the “Lesser” employer shared responsibility penalty for that one full-time employee).

When can an employee receive a premium tax credit?

• Household income is between 100% and 400% of the federal poverty line and they enroll in exchange coverage;
• They are not eligible for government coverage like Medicaid or CHIP;
• They are not eligible for employer-sponsored coverage or they are eligible only for employer coverage that is unaffordable or does not provide minimum value.

Play or Pay Compliance—

Neither last week’s final rules on employer shared responsibility, nor IRS’s 46 questions and answers, nor this blog will enable employers to fully understand the compliance implications of the Affordable Care Act “play or pay” mandate. A federal government requirement that employers offer health coverage to full-time employees is unprecedented. There are no experts.

Employers with fewer than 100 full-time employees now have until 2016 to comply; transition relief gives employers with more than 100 full-timers a tad more flexibility for 2015.

In any event employers are committed to being in compliance with the law—and therefore we need to commit to learn this new language.