There has been a long string of announcements by the Obama administration delaying implementation of the Affordable Care Act (ACA). The administration had previously delayed the application of the employer responsibility provisions (the employer mandate) from January 2014 to 2015. More recently, the administration gave employers with between 50-99 employees an additional year, until January 2016, to comply, subject to certain conditions. The administration also announced additional relief for large employers with 100 or more employees.
Regarding those employers with at least 50 but fewer than 100 full-time employees, the tax penalty for failing to comply with the employer mandate generally will not apply until 2016, if the employer provides an appropriate certification as described in the rules.
For those employers of 100 or more full-time employees, there is an additional break dealing with the permanent rule requiring that these employers must provide coverage for 95 percent of their employees. The transition rule for 2015 indicates that employers must only offer coverage to at least 70 percent of full-time employees as one of the conditions for avoiding the tax penalty, rather than 95 percent, which will begin now in 2016.
Further, for 2015 only, the $2,000 penalty for each full-time employee will exempt the first 80 full-time employees instead of 30.
In addition to the above two forms of transition relief for 2015, a package of limited transition rules that applied to 2014 has now been extended to 2015 under the Final Regulations. Employers with plan years that do not start on Jan. 1 will be able to begin compliance at the start of their plan years in 2015 rather than on Jan. 1, 2015, and the conditions for this relief are expanded to include more plan sponsors. The requirement that employers offer coverage to their full-time employees’ dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.
Note that the proposed regulations defined “dependents” for purposes of offering dependent coverage to eligible employees as children only, including natural, adopted, foster and step-children. In other words, spouses were excluded. The final regulations, issued in February, continue to exclude spouses, but revise the definition of dependent children to mean only natural and adopted children up to age 26. Thus, to be in compliance, a covered employer need not offer spousal coverage, or coverage for foster children, step-children or children who are not U.S. citizens or nationals, with limited exceptions. Of course, an employer may elect to offer such health insurance coverage.
One final important delay was announced by the administration in January. Under the health care law, an employer that has a fully-insured health plan that discriminates in favor of high-paid executives faces a potential penalty of as much as $100 per day for each individual affected negatively, similar to the non-discrimination rules that currently apply to self-insured plans. Tax officials have indicated that they would not enforce this provision during 2014 because they have yet to issue regulations for employers to follow.
Jeffrey G. Jones is a regional managing member for Wimberly Lawson Wright Daves & Jones PLLC. He can be reached at firstname.lastname@example.org.