Treasury and IRS Issue Final Regulations for the Employer Mandate for Health Insurance Coverage Under the Affordable Care Act
February 13, 2014
Early this week, the Treasury and IRS issued final regulations that provide guidance to employers for providing health insurance under the Affordable Care Act, known as the employer mandate. The Treasury and IRS have also indicated that additional final regulations will be issued shortly that aim to “substantially streamline” reporting requirements for employers that offer affordable health insurance coverage to their employees.
The final regulations issued this week generally are favorable to employers and delay or relax the employer mandate. New in the final regulations is a one-year delay for mid-size companies with 50-99 full-time equivalent workers. Mid-size companies will have until 2016 to comply with the employer mandate to provide health insurance. For companies that have historically had a non-calendar year health insurance year, the new mandate will be required in the first month of the employer’s health insurance plan year that begins in 2016. Mid-size companies must certify that they did not reduce their workforce to qualify as a mid-size company and must not have eliminated or significantly reduced the health insurance they offered as of February 9, 2014.
Large employers, those with 100 or more full-time equivalent employees, are required to offer affordable care insurance to their full-time employees beginning in 2015. Under the proposed regulations, employers were required to offer affordable health insurance coverage to 95 percent of their full-time workers to avoid owing a penalty. The final regulations have reduced this requirement to 70 percent for 2015, and will be increasing to 95 percent beginning in 2016.
For those large employers that do not offer health insurance coverage to their employees, the penalty calculation for 2015 is modified. For 2015 only, the penalty on an annualized basis is the number of full-time employees less 80 multiplied by $2,000. In 2016, the penalty calculation will revert to the number of full-time employees less 30 multiplied by $2,000.
The final regulations clarify that volunteers for a government or tax-exempt entity are not considered full-time employees. Students performing services under federal or state-sponsored work-study programs are also not counted in the number of full-time employees. Teachers and other educational employees are considered full-time employees even if school is closed or operates on a reduced schedule during the summer.
The rules for including seasonal employees as being full-time are liberalized. Under the final regulations, seasonal employees with a customary annual employment of six months or less are generally not counted as full-time employees.
While many employers will certainly welcome the new streamlined reporting requirements, there is still much to be considered and learned when it comes to effectively embracing this new landscape.