United States: Significant New Transition Relief Set Forth In Final ACA Shared Responsibility Regulations

On February 10, 2014, final regulations were published providing guidance to employers that are subject to the shared responsibility provisions regarding employee health coverage under the Affordable Care Act (ACA). Of the many issues addressed, the most significant is the additional one-year delay of the shared responsibility provisions for those employers with at least 50 but fewer than 100 full-time employees.

The shared responsibility provisions affect "applicable large employers"—generally defined as employers with 50 or more full-time employees [including full-time equivalent employees (FTEs)] during the prior year. Under the ACA, an applicable large employer that does not offer its full-time employees health coverage that is both affordable and provides minimum value may be subject to an assessable payment if a full-time employee enrolls in a qualified health plan for which the employee receives a premium tax credit.

While the ACA originally provided that these provisions would apply to months beginning after December 31, 2013, Notice 2013-45, issued on July 9, 2013, provided transition relief for 2014 so that no assessable payments would be due until January 1, 2015, at the earliest.

The final regulations provide guidance on a number of issues that were commented on at the time that proposed regulations were issued on December 28, 2012, including the treatment of seasonal employees and adjunct faculty as "full-time" employees. However, the most significant provisions of the final regulations are those that provide continued transition relief, namely for employers with at least 50 full-time employees but fewer than 100 full-time employees.

Transition Relief for Applicable Large Employers with Fewer than 100 Full-Time Employees

The final regulations acknowledge that the application of the shared responsibility provisions of the ACA will involve changes for applicable large employers that did not previously offer coverage, or that did not offer affordable minimum value coverage. The final regulations further note that a large percentage of those employers are in the smaller size range, such as those with fewer than 100 full-time employees (including FTEs). To assist these employers, transition relief is provided for all of 2015, plus in the case of any non-calendar year plan that begins in 2015, that portion of the 2015 plan year that falls in 2016. For these employers, no assessable penalty will apply if the following conditions are satisfied:

  1. The employer employs on average at least 50 full-time employees (including FTEs) but fewer than 100 full-time employees (including FTEs).
  2. The employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition. However, a reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition.
  3. During the coverage maintenance period (i.e., the period ending December 31, 2015, or the last day of the plan year that begins in 2015) the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. The final regulations outline exceptions where an employer will not be treated as eliminating or materially reducing health coverage—namely where the employer continues to offer each eligible employee an employer contribution toward the cost of employee-only coverage; coverage provides minimum value after the change in benefits; and the employer does not alter the terms of its group health plans to narrow or reduce the class or classes of employees to whom coverage under those plans was offered on February 9, 2014.
  4. The applicable large employer certifies that it meets the eligibility requirements set forth above. Such certification will be made on an as-yet-to-be published form.

This transition relief is not available for applicable large employers with 100 or more full-time employees (including FTEs). Such employers will be subject to potential assessable payments beginning as early as January 1, 2015.

Transition Guidance for 2015

Non-Calendar Year Plans

Employers with plan years that do not start on January 1 will be able to begin compliance with the shared responsibility provisions at the start of their plan years in 2015 rather than on January 1, 2015.

Shorter Measurement Periods Permitted for Stability Period Starting During 2015

On a one-time basis, in 2014 preparing for 2015, plans may use a measurement period of six months even with respect to a stability period—the time during which an employee with variable hours must be offered coverage—of up to 12 months.

Shorter Period Permitted for Determining Applicable Large Employer Status for 2015

Employers can determine whether they had at least 100 full-time employees or FTEs in the previous year by reference to a period of at least six-consecutive months, instead of a full year. The final regulations state that this will help facilitate compliance for employers that are subject to the shared responsibility provisions for the first time.

Coverage for Dependents

An applicable large employer must offer coverage to its full-time employees and the full-time employees' dependents in order to avoid a potential assessable payment. To provide employers sufficient time to expand their health plans to add dependent coverage, any employer that takes steps toward satisfying such offering of coverage to full-time employees' dependents beginning in 2016 will not be liable for any assessable payment solely on account of a failure to offer coverage to the dependents for the 2015 plan year. The final regulations continue to define "dependent" to mean a child of an employee who has not attained age 26 and specifically excludes spouses from the definition of "dependent."

Additional Limited 2015 Transition Relief

Offers of Coverage to at Least 70 Percent of Full-Time Employees

The final regulations generally provide that an applicable large employer is treated as "offering coverage" to its full-time employees if it offers coverage to all but five percent of its full-time employees. However, as further transition relief, for each calendar month during 2015 and any calendar month during the 2015 plan year that falls in 2016, an applicable large employer that offers coverage to at least 70 percent (or that fails to offer to no more than 30 percent) of its full-time employees will not be subject to an assessable penalty. This transition relief is available to all applicable large employers—there is no cutoff at 100 full-time employees (including FTEs)—and is designed to help employers that may offer coverage to employees with 35 or more hours but not yet to those employees who work 30 to 34 hours per week.

Calculation of Assessable Payments for Applicable Large Employers with 100 or More Full-Time Employees for 2015

In general, an assessable payment is equal to the number of all full-time employees (excluding 30 full-time employees) multiplied by one-twelfth of $2,000 for each calendar month. However, for 2015 plus any calendar months of 2016 that fall within the employer's 2015 plan year, if an applicable large employer with 100 or more full-time employees (including FTEs) is subject to an assessable payment, the assessable payment will be calculated by reducing an applicable large employer member's number of full-time employees by that member's allocable share of 80 rather than 30. This additional 50 full-time employee deductible will serve to reduce (or potentially eliminate entirely) an employer's assessable payment for 2015.

The final regulations provide significant transition relief through 2014 and 2015, and potentially impacted employers should review the impact of the final regulations on their obligations to offer health coverage to their employees. In particular, employers with between 50 and 100 full-time employees (including FTEs) have been granted another year during which no assessable payments will be due, regardless of whether coverage is offered or if such offered coverage is affordable.

About Duane Morris

Duane Morris attorneys assist employers on compliance with the ACA and will continue to monitor these developments and provide updates as appropriate. This is of particular significance in light of the fact that the final regulations state that the U.S. Treasury Department will continue to consider whether it is necessary to further extend any of the limited transition rules beyond 2015.

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

This article is for general information and does not include full legal analysis of the matters presented. It should not be construed or relied upon as legal advice or legal opinion on any specific facts or circumstances. The description of the results of any specific case or transaction contained herein does not mean or suggest that similar results can or could be obtained in any other matter. Each legal matter should be considered to be unique and subject to varying results. The invitation to contact the authors or attorneys in our firm is not a solicitation to provide professional services and should not be construed as a statement as to any availability to perform legal services in any jurisdiction in which such attorney is not permitted to practice.

Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. Duane Morris LLP, a full-service law firm with more than 700 attorneys in 24 offices in the United States and internationally, offers innovative solutions to the legal and business challenges presented by today's evolving global markets. The Duane Morris Institute provides training workshops for HR professionals, in-house counsel, benefits administrators and senior managers.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Proskauer Rose LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Proskauer Rose LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions