Date: March 4, 2014
(1) Does your company* have 100 or more full-time employees (including full-time equivalents) based on a determination of employee data during the calendar year 2014**?
If no, the employer mandate will not apply to your company for 2015.
If yes, proceed below.
* Under IRS controlled group rules, related entities with a majority of common ownership are included.
** IRS final guidance allows an employer to use any consecutive 6-month period in the 2014 calendar year to determine mandate applicability (rather than the full 12-month year). Employers with 50-99 will be exempt for 2015 per transition rule but will have to confirm via formal certification to IRS.
(2) Does your company offer qualifying group health coverage (“minimum essential coverage”) to all or nearly all 30+ hour employees?
If yes, then you will not be at risk under the penalty for not offering coverage (the 4980H(A) penalty, or “sledgehammer”). The key will be identifying all 30+ hour employees and ensuring that they are offered coverage at the 2015 effective date, whether or not they elect the coverage. A transition rule states that employers who offer coverage to 70% or more of the 30+ hour employees will not be subject to this penalty. Proceed to #3 below to confirm coverage details (affordability component).
If no, then you are at risk of the sledgehammer penalty unless the 70% transition rule applies. The applicable penalty would be $167 per month ($2,000 per year) for all 30+ hour employees, minus 80, for any month in which an individual who is a 30-hour employee receives subsidized coverage through the Exchange. Since this penalty would apply, #3 below does not apply.
(3) If your company offers group health coverage to 70% or more of 30+ hour employees, is that coverage “affordable” and “minimum value”? The affordability measure is whether an eligible employee enrolled in self-only coverage would pay more than 9.5% of his/her annual taxable income.
If yes, then you are likely in compliance and not be at risk under the penalty for non-qualifying coverage (the 4980H(B) penalty, or “tackhammer”).
If no, then you are at risk of the tackhammer penalty. This penalty would be $250 per month ($3,000 per year) for any month in which a 30-hour employee receives subsidized Marketplace coverage. However, unlike the penalty for not offering coverage described in #2, this penalty will be charged only on 30+ hour employees receiving subsidized coverage and not on all 30+ employees.
– The employer mandate is scheduled to apply to 100+ employers on January 1, 2015 and 50+ employers on January 1, 2016. Most employers with non-calendar year plans may qualify for a delay in the effective date until the 2015 renewal, depending on whether the company meets the transition rule in the final guidance. Certain employers may have to comply for January 2015 regardless of renewal date.
– To identify 30+ hour employees, refer to IRS guidance on the measurement period and hours of service.
– The items listed in blue font indicate new transition rules that apply only for 2015. Contact us for assistance with determining target dates for compliance and strategic planning.
Summary drafted by Jason Cogdill, Benefits Attorney