Since its inception, the Affordable Care Act has become an endless source of media coverage. First, it was the constitutionality of the individual mandate. Then, it was the roll-out of the “Exchange” website. Lately, it has been the so-called “pay or play” provisions, which ultimately require large employers to offer their full-time employees “affordable” health insurance to avoid paying a penalty.
The pay or play provisions are more formally known as the “Employer Shared Responsibility” (“ESR”) provisions. When the ESR provisions are fully implemented, large employers (generally those employing 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be charged fees for either (1) not offering insurance to at least 95 percent of their full-time employees and their dependents or (2) offering insurance is that is not “affordable.” If a large employer does not offer coverage to at least 95 percent of its full-time employees, the employer will be required to pay a $2,000 penalty for each of its full-time employee (minus 30). If an employer offers unaffordable coverage, the employer will be required to pay a $3,000 penalty for each full-time employee that receives a premium tax credit. Coverage is unaffordable if the employee’s share of the premium for single coverage on the employer-provided coverage would cost the employee more than 9.5 percent of that employee’s annual household income.
There has been significant push-back from employers regarding the ESR provisions due to the IRS’ method of calculating “full-time.” The method for calculating whether an employee is full-time under the law is cumbersome, confusing and difficult for employers to grasp.
You may recall that the ESR provisions were supposed to go into effect this year — in 2014. However, late last summer, in response to the employer push-back, the White House delayed enforcement of the ESR provisions until 2015 because the White House believed employers needed more time to comply with the new rules. Then, earlier this year, the IRS issued final regulations in which it delayed enforcement of the ESR provisions until 2016 for employers with less than 100 full-time employees.
Unfortunately for employers, it looks like the cumbersome method for calculating whether an employee is full-time is here to stay. But because of the enforcement delays, there is no better time than now to get educated about this method and the ESR provisions in general. Because there are no ESR penalties in 2014, use this year as a period of trial and error. Use 2014 as a time to ask questions, to learn what will be expected of you both as an employer and an employee, and to understand the changes and responsibilities coming your way due to requirements set out in the ESR provisions.
Information provided by Stephanie J. Copley, Hopkins & Huebner P.C., 2700 Grand Ave., Suite 111, Des Moines.