With the Politico’s latest prediction that the Democrats will lose control of the Senate and have double-digit losses in the house, it’s not hard to understand why President Obama is rolling back some of the most distasteful parts of the Employer Mandate.
With the new buzz word being “transitional relief,” we now have the Internal Revenue Service guidelines that lay out what employers can expect for implementation in 2015 and 2016. Please note: many of these policies will start dialing in at the end of this year as employers renew their health insurance.
The following is a condensed version of the new Internal Revenue Service guidelines that should offer some insight into compliance issues. If you have questions or concerns after reading the material, please feel free to contact me via email or by calling our offices at 1 800 385-2224.
America’s Healthcare Advocate
What Has Changed?
Under the Affordable Care Act, all but the smallest employers must offer affordable qualifying health coverage to their employees, or face penalties. However, the details and effective date of this mandate have been shifting. The employer shared responsibility requirements, also known as the “employer mandate,” was originally scheduled to take effect on or after 1/1/14. In July 2013, it was announced that enforcement had been delayed to 1/1/15, and, now, full enforcement has been delayed again. The final rules are complex. The information here provides a high level summary.
On February 10, 2014, the Internal Revenue Service (IRS) and the Department of the Treasury issued a final rule implementing the employer shared responsibility requirements. As part of the final rule, it was announced that medium-sized employers (i.e., those with 50 to 99 full-time or full-time equivalent employees) are now given more time to comply, and large employers (i.e., those with 100 or more full-time or full-time equivalents) can phase in coverage to their entire full-time population over a period of time. Small employers (i.e., those with fewer than 50 full-time or full-time equivalent employees) are generally exempt from this requirement.
Here’s what the final rule means for employers:
– Employers with 50 to 90 full-time or full-time equivalent employees: The requirement now won’t be enforced until plan years with effective dates on or after 1/1/16, if certain conditions are met.
– Employers with 100 or more full-time or full-time equivalent employees: Transitional relief is now available. These employers will need to offer coverage to at least 70 percent of full-time employees in 2015 and at least 95 percent in 2016 and beyond for the 4980H(a) penalty not to be triggered.
What will happen if a large employer (i.e., one with 50 or more full-time or full-time equivalent employees) fails to offer full-time employees (and their dependent children, unless transition relief applies) access to health care coverage
If coverage is not offered, and one or more of the employer’s full-time employees enrolls in subsidized coverage on a public exchange, the employer may be subject to a penalty. This penalty is equal to the total number of full-time employees employed for the preceding year (minus 80 in 2015, and minus 30 in 2016 and thereafter) multiplied by $2,000. (Known as the 4980H(a) penalty)
What will happen if a large employer offers coverage but that coverage is not affordable or does not meet Minimum Value (MV)?
If coverage is not affordable or does not meet MV, and one or more of the employer’s full-time employees enrolls in subsidized coverage on the public exchange, the employer may be subject to a penalty. This penalty is equal to $3,000 for each subsidized full-time employee that obtains subsidized coverage on the public exchange. It is capped at the amount that could be assessed for failing to offer coverage. (Known as the 4980H(b) penalty)
Following is more detail on the final rule, and links to additional resources. Coventry Health Care encourages you to become familiar with information below and prepare to comply with these complex regulatory requirements.
Medium-size employers given more time to comply
Under the final rules, employers with 50 to 99 full-time or full-time equivalent employees will now generally have until plan years beginning on or after 1/1/16 before enforcement of the employer mandate begins. The administration described this additional extension as a form of “transition relief” to help these employers adjust to and comply with these complex requirements.
To be eligible for this relief, employers will be required to provide a certification that they have not reduced their workforce or overall hours of service in order to avoid having to comply with the employer mandate, and that they have not eliminated or materially reduced health coverage. This form will be supplied by the Internal Revenue Service and must be returned to them in order to qualify.
Gradual enforcement for larger employers
The final rules also provided for transition relief for employers with 100 or more full-time or full-time equivalent employees with regard to the offer of coverage penalties (under 4980H(a)). Employers in this category will need to offer coverage to 70 percent of full-time employees (and their dependents, unless the dependent transition relief is applicable) in 2015 and 95 percent in 2016, and beyond, or they will be subject to potential tax penalties under 4980H(a). Note: that 4980H(b) penalties related to affordable/minimum value coverage may still be applicable.