Health Care Reform Developments Week of February 10 2014(1)Document Transcript
February 11, 2014
Health Care Reform Update: Week of February 10
Final Regulations on Employer Pay or Play Provisions
On February 10, 2014, the Department of Treasury issued final regulations implementing the
employer shared responsibility provisions (also known as the employer pay or play mandate) under
the Patient Protection and Affordable Care Act (PPACA), the portion of the health care reform law
that requires large employers to provide health coverage for their full-time employees or pay a
penalty. These regulations adopt many of the rules addressed in the proposed regulations that the
Treasury Department released on December 28, 2012, as well as implement many new changes. The
following briefly highlights that new guidance.
Employer Mandate Further Delayed for Some Employers
Those employers with 50 to 99 full-time employees and employee equivalents are not required to
comply with the pay or play requirements until 2016. Employers with 100 or more full-time
employees and employee equivalents continue to be subject to shared responsibility beginning in
2015. An employer can determine if it has between 50 to 99 full-time employees and employee
equivalents by reference to any period of at least 6 consecutive months during 2014 that the employer
chooses. If the employer has the requisite number of full-time employees, the employer must also
certify that it meets the following conditions:
During the period beginning February 9, 2014 and ending on December 31, 2014, the
employer has not reduced the size of its workforce or the overall hours of service of its
employees in order to qualify for the transition relief; and
The employer does not eliminate or materially reduce employee health coverage, if any, that
the employer offered as of February 9, 2014, during the period beginning February 9, 2014
and ending on December 31, 2014 (or, for employers with non-calendar year plans, ending on
the last day of the employer’s 2015 plan year).
New Transition Rules Introduced
Change in Percentage of Covered Employees Requirement
For 2015, those employers who are subject to the pay or play mandate are required to provide
minimum essential coverage for at least 70% of their full-time employees (i.e., employees
working at least 30 hours per week), rather than the 95% coverage rate that was described in the
proposed regulations. In 2016 and beyond, employers will be required to provide coverage for
95% of their full-time employees.
Coverage of Dependents
February 11, 2014
In 2015 employers who are obligated to comply with the pay or play mandate are not required to
cover dependents, as previously stated in the proposed regulations. The obligation under shared
responsibility to cover all dependents will not begin until 2016.
Please note that this transition rule applies to employers who do not offer dependent coverage,
offer dependent coverage that does not constitute minimum essential coverage, or offer dependent
coverage to some but not all dependents. Transition relief is not available to the extent the
employer offered dependent coverage during either the 2013 or the 2014 plan year and
subsequently dropped that coverage. This relief applies only for dependents who were without an
offer of coverage from the employer in both the 2013 and 2014 plan years and if the employer
takes steps during the 2014 and 2015 plan year (or both) to extend coverage under the plan to
dependents not offered coverage during the 2013 or 2014 plan year (or both).
There has been no change in the law regarding coverage of spouses, and there continues to be no
obligation under shared responsibility for employers to provide coverage for spouses.
Prior Transition Rules Retained
Effective Date for Non-Calendar Year Plans
Employers with non-calendar year health plans and 100 or more full-time employees and
employee equivalents become subject to the pay or play rules as of the first day of their 2015 plan
year, rather than the January 1, 2015 effective date that applies to calendar year plans. The final
regulations continue the transition rule that was identified in the proposed regulations, including
certain requirements that must be met in order for an employer to apply this transition rule, plus
some additional requirements that have been imposed.
Look-Back Measurement Period
An employer who is subject to the pay or play mandate in 2015 and has variable hour employees
may determine those employees’ full-time employee status based on a look-back measurement
period of 6 months, even though the employer’s applicable stability period (i.e., the period during
which the employee’s status quo, coverage or non-coverage, is maintained prior to the next
measurement period) is up to 12 months. While the ongoing shared responsibility rules will
require that the stability period be the longer of 6 months or the length of the measurement period,
for the first year that pay-or-play originally was in effect the proposed regulations allowed an
employer to use a measurement period of at least 6 months but less than 12 months even if the
employer’s stability period was 12 months. That optional transition rule was continued in the
final regulations for 2015.
February 11, 2014
Determination of Full-Time Status for Certain Employee Categories
The final regulations provide guidance for the following occupations and employee categories in
determining whether an individual is considered a full-time employee:
Volunteers—bona fide volunteers for a government or tax-exempt entity (e.g., volunteer
firefighters and emergency responders) are not considered full-time employees.
Educational Employees—teachers and other educational employees are not treated as part-time
for the year based solely on the school being closed or operating on a limited schedule during the
Seasonal Employees—positions for which the customary annual employment is 6 months or less
are generally not considered to be full-time.
Student Work-Study Programs—service performed by students under federal or state-sponsored
work-study programs is not counted towards determining whether the students are full-time
Adjunct Faculty—employers can credit an adjunct faculty member with 2 ¼ hours of service per
week for each hour of teaching or classroom time as a reasonable method for determining whether
the adjunct faculty member is a full-time employee, as well as any other method of crediting
hours of service for those employees that is reasonable under the circumstances and consistent
with the employer shared responsibility provisions.
Please note that even though these regulations are final, they continue to be a work in progress. Some
of the transition rules and other guidance incorporate provisions that promise additional guidance and
leave numerous terms undefined. Willis’ National Legal & Research Group will continue to review
and provide timely updates on these and other related changes in Health Care Reform that affect
This information is not intended to represent legal or tax advice and has been prepared solely for informational
purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.