By Amy Robinson
Just a few months ago, the Obama administration announced that it would delay enforcement of the "Play or Pay" component from January 1, 2014 until January 1, 2015. On Monday, February 17, the IRS and the U.S. Department of Treasury issued final regulations implementing the Employer Shared Responsibility Provisions of PPACA, and bumped the enforcement deadline further back for some employers, and made some potentially significant clarifications that affect small and medium businesses going forward.2
Here are a few of the highlights employers will take an interest in:
The new regulations describe three separate groups of employers for purposes of the Play or Pay mandate:
- Those with less than 50 FTEs and thus not subject to the Play or Pay mandate.3
- Those with 50-99 FTEs in the prior calendar year, which are defined as "Applicable Large Employers with Fewer than 100 Full-Time Employees" (some refer to this as a "medium" employer), and who get the benefit of an additional year to comply with the Play or Pay mandate as more fully explained below.4
- "Large employers" are those with 100 or more FTEs and for whom the Play or Pay mandate kicks in on January 1, 2015.
- The new regulations also provide "phasing in" provisions that extend the deadline to 2016 for "medium" employers before enforcement penalties are applicable, although reporting obligations continue in effect for 2015. The regulations also offer a concession to Large employers who offer coverage to most, but not all full-time employees. To avoid penalties, large employers must offer coverage to at least 70% of full-time employees in 2015 and 95% in 2016 and beyond.
The regulations clarify that certain types of employees and certain occupations aren't considered full-time for purposes of these obligations. Those include:
- Volunteers. Bona fide volunteers of government or tax-exempt entities (which are generally the only entities that can legally engage volunteers — see Fair Labor Standards Act Advisor — are not included in the FTE calculation, or otherwise considered full-time employees for purpose of these obligations. This includes volunteer firefighters and other emergency responders.
- Work-Study Students. Students "employed" in connection with qualified federal or state-sponsored work-study programs are not included.
- Seasonal employees. Those in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.
While many "medium" size employers may be breathing a sigh of relief, be aware that this doesn't mean that all obligations that might apply to these businesses are suspended entirely. See, "Recent "Pause" on Obama Care Rollout Does Not Postpone All Obligations: 5 Key Changes Still Affecting Employers in 2013" and a follow up "Health Care Reform Update: Model Employee Notices Now Available, Due by October 1, 2013."
If you have a specific question about any of the requirements included in this article or individual compliance requirements applicable to your business, please consult your legal counsel, benefits advisor, and/or qualified tax professional.
The employment attorneys at Jordan Ramis PC know HR and the law. Please contact us if we can be of assistance.
This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.
1. Full-time equivalent employees (also known as FTE's) are defined as those who work an average of 30 hours per week per month. IRS Guidance on how to define "full-time employee" including a lookback/stability period that would apply to fluctuating/variable work schedules is available online. See Determining Full-Time Employees for Purposes of Shared Responsibility for Employers Regarding Health Coverage (§ 4980H).
3. United States, Internal Revenue Service. (2014) Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, retrieved from the Internal Revenue Service's website.
4. United States, Internal Revenue Service. (2014) Determining Full-Time Employees for Puposes of Shared Responsibility for Employers Regarding Health Coverage (§ 4980H), retrieved from the Internal Revenue Service's website.