The Treasury Department and Internal Revenue Service announced on Monday that the Obama Administration would further delay implementation of the “employer mandate” under the Affordable Care Act for certain employers until 2016.  The employer mandate requires businesses that employ more than 50 full-time employees to provide minimum levels of affordable health insurance to their employees, or face a penalty.

Under final regulations implementing the employer mandate, employers with 50 to 99 full-time employees  will have until 2016 to comply with the employer mandate.  Employers with 100 or more full-time employees will have until 2015 to comply, but now need only offer coverage to 70 percent of their full-time employees to avoid a penalty in 2015, and offer coverage to 95 percent of their full-time employees by 2016.  The proposed regulations had required employers with 100 or more full-time employees to offer coverage to 95 percent of their full-time employees in 2015.  This delay does not affect the individual mandate which requires most Americans to carry health insurance or face a tax penalty.

In addition to delaying the implementation of the employer mandate, the final regulations released by the Treasury Department and Internal Revenue Service also addressed certain specific scenarios relating to the employer mandate: (1) volunteers for a government or tax-exempt entity, such as volunteer firefighters or emergency responders, will not be counted towards full-time employees; (2) teachers and other educational employees will not be treated as part-time during the summer when school is closed; (3) seasonal employees that work than less than six months annually will not be considered full-time employees; (4) work-study employees will not be counted towards full-time employees; and (5) adjunct faculty members will be permitted to credit 2.25 hours of service per week for each hour of classroom teaching for purposes of determining full- or part-time status.

The final regulations also finalize the three safe harbors that allow employers to determine whether their coverage meets affordability standards.  Coverage is considered affordable if the employee’s required contribution for individual coverage does not exceed 9.5% of the employee’s household income for the taxable year.  These safe harbors were previously announced in the proposed regulations and are designed to address concerns that employers cannot know an individual’s household income because they do not know all the sources of an employee’s income.  First, the W-2 safe harbor allows employers to determine affordability by referring to the employee’s wages from that employer.  Second, the Rate of Pay safe harbor allows employers to determine affordability by referring to the hourly rate of such employee multiplied by 130 per month.  Finally, the Federal Poverty Line safe harbor permits an employer to determine affordability by referring to the federal poverty line for a single individual.