Medium-sized employers recently gained a brief reprieve from the shared responsibility requirements, often called the employer mandate, under the Patient Protection and Affordable Care Act (“PPACA”). Last month, the U.S. Treasury Department (the “Department”) announced, as part of its release of final rules on the employer mandate, that it would not enforce the mandate until 2016 for businesses with 50-99 employees. The employer mandate, which requires employers with more than 50 employees to offer coverage to its full-time employees or potentially face a penalty, was originally supposed to go into effect this year. In July, however, the Department delayed enforcement for all employers until 2015. In its most recent announcement, the Department explains that all employers must comply with reporting requirements in 2015, but it will not levy any fines on employers with 50-99 employees until 2016. Further, large employers, or those with more than 100 employees, will need to offer coverage to 70% of their full-time employees in 2015, but by 2016, these employers will need to offer coverage to 95% of their full-time employees.
An employer may not, however, reduce its workforce to below 100 workers in an effort to delay its obligations under the employer mandate. For the period beginning February 9, 2014 and ending December 31, 2014, if an employer reduces the size of its workforce or reduces its employees’ hours of service, then it will have to certify that these decisions were made for “bona fide business reasons.” According to the Department, a bona fide business reason may include the sale of a division, changes in the employer’s economic marketplace, or termination of employment as a result of poor performance. Essentially, the reason must be unrelated to the employer’s eligibility under this new rule. Also, during this period, an employer may not eliminate or materially reduce any existing health coverage. Employers with non-calendar plan years must maintain their current coverage through the last day of the plan year that begins in 2015.
As employers continue to incorporate the mandate requirements and work to ensure their compliance, these new rules may grant some relief. But there is still much that is unknown regarding the implementation including how employers will document their compliance and report it to the IRS. As such, employers are unlikely to halt their planning and preparation related to the employer mandate.Back to news