/>iThe Affordable Care Act is a massive law that affects a large swath of the U.S. economy. Providers, payers, carriers, individuals, and, yes, employers, are affected, each in different, and in many cases overlapping, ways. For “large” employers, i.e., those with 50 or more full-time and fulltime equivalent employees on average business days during the prior calendar year, the Act’s “pay-or-play” rules (a/k/a “employer shared responsibility”) are of paramount interest. Though originally slated to take effect January 1, 2014, the pay-or-play rules were postponed for one year, to January 1, 2015 (IRS Notice 2013-45). 2014 will be a critically important year as employers prepare to compliance in 2015. The regulators—principally the IRS, the Department of Labor and the Department of Health and Human Services—must issues the necessary regulations and other guidance necessary to implement the particulars not only of the pay-or-play rules but other provisions of the law that impact the employer- and union-sponsored group health plans.
Proposed regulations issued at the end of 2012 and published in the Federal Register on January 2, 2013 set out a “pay-or-play” framework. (For an explanation of these proposed regulations, please see our client advisory.) The preamble to the proposed regulations granted a series of transitional rules that were intended to assist employers as they endeavor to understand, navigate, and comply. But these transitional rule were all keyed to 2014. With one exception, it’s not clear which rules will be extended and which will not. (The IRS as yet to say.) One item of transitional relief—related to the timing of compliance be fiscal year plans—is of particular importance. If this rule is not extended, the compliance will be required in the middle of the plan year commencing in 2014.
Set out below is a summary of the transitional rules together with our speculation on our part as to where the regulators may, should, or will land:
|
2014 Transition Relief |
2015 Transition Relief |
|
|
(1) |
For purposed of determining an employer’s status as an applicable large employer, employers could test any six consecutive months in 2013 as opposed to all of 2013 |
Unlikely that this rule will be extended. Employers have had ample time to understand this rule and prepare for its application. |
|
(2) |
When applying the “look-back measurement method” to determine an employee’s status as “variable hour,” an employer could factor into anticipated turnover and tenure. |
Unlikely that this rule will be extended. The proposed regulations provided this transitional relief reluctantly based on a perceived misunderstanding of the rule in prior guidance. |
|
(3) |
When applying the “look-back measurement method” to determine an employee’s status as “variable hour,” an employer that selected twelve month measurement and twelve month stability periods could shorten the 2013 measurement period to no less than six months, beginning July 1, 2013. |
Unlikely that this rule will be extended. Employers have had ample time to understand this rule and prepare for its application. |
|
(4) |
Any employer failing to offer dependent coverage during 2014 could avoid the § 4980H(a) employer mandate by taking steps during its plan year that begins in 2014 toward offering of coverage to full-time employees and their dependents. |
Unlikely that this rule will be extended. Employers have had ample time to understand this rule and prepare for its application. |
|
(5) |
Employers with fiscal years plans that previously offered coverage to a at least 33% of all employees (full-time and part-time) or actually covered 25% of all employees limit compliance to coverage months commencing with the 2014 fiscal year provided the coverage was unchanged from December 27, 2012. |
It is hoped that this relief or some form of it survives. The plight of fiscal year plans has not changed with the passage of 12 months. Compliance with the Act’s employer shared responsibility rules will still start mid-year. Failure to extend the rule would mean that an employer would either need to (i) comply sooner than the law requires or (ii) change their group health plan mid-year. |
|
(6) |
An employer could amend its fiscal year cafeteria plans to permit certain salary reduction elections to be made during 2013 so that employees could either (i) drop employer-provided coverage and instead obtain coverage through a public exchange, or (ii) elect to enroll in employer-provided coverage in order to avoid the individual mandate tax. |
In recently issued guidance issued (IRS Notice 2013-71, Section VI.B; this rule was been extended. |
|
(7) |
An employer is treated as making an offer of coverage by virtue of contributing to a collectively bargained multiemployer plan, provided that the plan covers dependents, is affordable, and provides minimum value. |
Somerelief is necessary for employers that contribute to collectively bargained multiemployer plans. And while this rule is decried as “transitional” in nature, it more structural than transitional. If the regulators are not prepared to announce a permanent rule any time soon, then this relied should be extended. |
We expect that these relief transitional issues will be addressed in final regulations or other guidance, which we hope to see sooner rather than later.
