470 / What transition relief was initially provided with respect to the ACA employer mandate?
The proposed employer mandate regulations allowed employers with fiscal year cafeteria plans to amend their cafeteria plans to permit employees to elect or revoke health coverage elections mid-year even absent a corresponding change in status or cost of coverage change during a non-calendar plan year that began in 2013.2 The final regulations did not extend this relief. The following rules also apply:
If the employer had on average fewer than 50 full-time (and full-time equivalent) employees (FTEs) in 2014:
No change. The employer is not subject to the mandate. Employers close to the 50-employee threshold may count employees during any consecutive six-month period (as chosen by the employer) during 2014.
If the employer had on average between 50 and 99 FTEs in 2014:
The employer had a one-year delay in the employer mandate, until January 1, 2016 (and for non-calendar-year plans, any calendar months during the plan year beginning in 2015 that fall in 2016) if:
The employer certified it did not lay off employees during the period beginning on February 9, 2014 and ending on December 31, 2014 to fall below the 100 employee threshold and that the employer did not reduce any coverage it was already offering, and
During the period beginning on February 9, 2014 and ending on December 31, 2014, the employer did not eliminate or materially reduce the health coverage, if any, offered as of February 9, 2014. An employer was not treated as eliminating or materially reducing health coverage if, for each employee who was eligible for coverage on February 9, 2014:
(a) The employer offered to make a contribution toward the cost of employee-only coverage that was either (i) at least 95 percent of the dollar amount of the contribution the employer was making toward the coverage in effect as of February 9, 2014, or (ii) at least the same percentage of the cost of coverage that the employer offered to contribute toward coverage in effect as of February 9, 2014;
(b) Benefits offered as of February 9, 2014 at the employee-only coverage level did not change, or, if it did, the coverage after the change provided minimum value; and
(c) Eligibility under the employer’s group health plans was not amended to narrow or reduce the class or classes of employees (or the employees’ dependents) to whom coverage under those plans was offered as of February 9, 2014.
Such employer must report coverage of employer’s employees for 2015.
If the employer had on average 100 or more FTEs in 2014:
If an employer failed to offer coverage to a full-time employee for any day of a calendar month, that employee was treated as not having been offered coverage during the entire month. For January 2015, if an employer offered coverage to a full-time employee no later than the first day of the first payroll period that began in January 2015, the employee was treated as having been offered coverage for January 2015.
Employers with Fiscal Year Health Plans. The employer mandate remained effective on January 1, 2015. However, employers with non-calendar (fiscal) year plans could be subject to the mandate based on the start of their 2015 plan year rather than on January 1, 2015, and other transition relief where certain conditions were met, as follows:
(a) Pre-2015 Fiscal Year Plan Eligibility Transition Relief. Pre-2015 eligibility transition relief applies to employees, whenever hired, who were:
- Eligible for coverage on the first day of the 2015 plan year under the eligibility terms of the plan as of February 9, 2014 (whether or not they elected coverage); and
- Offered affordable coverage that provided minimum value effective no later than the first day of the 2015 plan year.
Where these two conditions were satisfied, the employer was not subject to a potential employer shared responsibility payment until the first day of the 2015 plan year. This relief applied only to employees to whom coverage was previously offered by the employer. Thus, penalties could still be imposed for the months in 2015 that were part of the plan year commencing in 2014 for employees to whom coverage was not previously offered.
(b) Significant Percentage Fiscal Year Plan Transition Relief (All Employees). No employer mandate penalty applied for any month before the first day of the plan year beginning in 2015 for employees who were offered affordable coverage that provided minimum value by the first day of the 2015 plan year if, as of any date in the 12 months ending on February 9, 2014, an employer:
- Covered at least one-quarter of its employees (full-time and part-time) under its non-calendar year plan; or
- Offered coverage under the plan to one-third or more of its employees during the open enrollment period that ended most recently before February 9, 2014.
To qualify for this relief, the employee must not have been eligible for coverage as of February 9, 2014 under any group health plan maintained by his or her employer that has a calendar year plan year.
Planning Point: Unlike the pre-2015 eligibility transition relief discussed above, an employer that qualifies for this relief and who offers affordable, minimum value coverage commencing with the 2015 plan year has no IRC Section 4980H exposure for periods before the 2015 plan year. Relief under this and the next transition rule applies for the period before the first day of the first non-calendar year plan year beginning in 2015 but only for employers that maintained non-calendar year plans as of December 27, 2012, and only if the plan year was not modified after December 27, 2012, to begin at a later calendar date.
70 Percent Offer in 2015. For 2015 (and for any calendar months during a non-calendar year plan year beginning in 2015 that fall in 2016), the 95 percent offer of coverage threshold was lowered to 70 percent. Thus, in 2015, an employer would be in compliance if it offered coverage to at least 70 percent of full-time employees and dependents in 2015 unless the employer qualified for the 2015 dependent coverage transition relief, discussed below), although an employer will owe a penalty if at least one of the full-time employees received a premium tax credit for coverage in the public marketplace, which may have occurred because the employer did not offer coverage to that employee or because the coverage the employer offered was either unaffordable or did not provide minimum value.
Dependent Coverage. In order to avoid exposure for the employer mandate penalty, an employer must offer coverage not only to full-time employees but also to their dependents (but not spouses). The final regulations provided transition relief for plan years that began in 2015 if the employer took steps during the 2015 plan year toward satisfying this requirement in 2016. The transition relief applied to employers for the 2015 plan year for plans under which (i) dependent coverage was not offered, (ii) dependent coverage that does not constitute minimum essential coverage was offered, or (iii) dependent coverage was offered for some, but not all, dependents. This relief was not available, however, if the employer had offered dependent coverage during either the plan year that began in 2013 or the 2014 plan year and subsequently eliminated that offer of coverage.
In 2016 and after, the employer must offer coverage to at least 95 percent of full-time employees and dependents.
These applicable large employers must report coverage of employees beginning with 2015.
An applicable large employer will not be subject to shared responsibility penalties with respect to employees for whom the employer is required (whether by the collective bargaining agreement or appropriate related participation agreement) to make contributions to a multiemployer plan.