The Treasury Department issued final regulations on the employer shared responsibility provisions, commonly known as the “employer mandate,” on February 10, 2014. The regulations covered several topics:
Phasing in of the Employer Mandate by Employer Size:
Employers with 50 to 99 full-time employees will not face penalties for not offering coverage to full-time employees and their dependents up to age 26 until the first plan year beginning on or after January 1, 2016. These employers will need to certify that they are not reducing the size of their workforce to stay below 100 employees.
Employers with 100 or more full-time employees and their dependents up to age 26 will not face penalties if they offer coverage to 70% of their full-time employees in 2015. They will need to offer coverage to 95% of full-time employees beginning in 2016. The full-time employee definition remains at 30 hours or more per week. The definition of dependent has been revised to exclude stepchildren and foster children. It continues to exclude spouses.
Extension of Transition Relief for 2015 The final regulations extend transitional relief in several ways, including:
Determining Full-Time and Part-Time Employees: The regulations clarify the methods employers can use to determine whether employees are full-time. They also address these specific situations:
Safe Harbors for Determining if Coverage is Affordable: The regulations confirm that employers can use W-2 wages, hourly rates or the federal poverty level to determine whether the coverage they offer is “affordable.” If using the W-2 safe harbor, full W-2 wages must be used and cannot be reduced for salary reduction elections under a 401(k) plan or a cafeteria plan.
New Businesses and New Employees: If an employer didn’t exist in the prior calendar year, the employer should determine whether it is a large employer based on the average number of employees it reasonably expects to employ on business days in the current year. For new employees, the employer is not subject to a penalty for the first three months of employment if coverage is offered no later than the first day of the fourth month of employment.