On February 10, the US Treasury Department issued new final regulations pertaining to the employer mandate under the Patient Protection and Affordable Care Act of 2010 (PPACA), the controversial law known informally as “Obamacare.” No surprise there. But the government dropped a bombshell in the new regulations: It postponed the start date of the employer mandate for certain employers to 2016 – the second extension approved in less than a year.
Under the PPACA, an employer with fifty or more full-time employees may be penalized $2,000 per employee if it fails to provide affordable health insurance coverage to eligible workers. For this purpose, a “full-time employee” is defined as someone working on average thirty or more hours per week. The law includes complex calculations for determining actual penalties.
At its inception, the law required employers to comply with this requirement by January 1, 2014, at the same time the mandate for individuals to obtain coverage kicked in. But last summer, the Treasury Department delayed the deadline for employers for one year until January 1, 2015. Now some employers will receive a second reprieve.
The new final regulations provide guidance on numerous aspects of the employer mandate. It spells out the rules for all sizes of employers – small, medium, and large – based on the number of full-time employees.
Small employers (less than fifty full-time employees): These employers could already rest easy knowing that the employer mandate didn‘t apply to them. Now the new regulations clarify that small employers won’t have to fill out any forms or complete other paperwork in 2015. According to the federal government, the smallest-sized firms represent a whopping 96 percent of all the business entities. The other 4 percent is divided roughly evenly between medium and large employers.
Medium employers (fifty to ninety-nine full-time employees): This group of employers is the one benefiting from a second extension of the Obamacare mandate. The rules won’t begin to apply until January 1, 2016, two years after the initial deadline and one year later than the date after the first postponement. Employers must certify that they didn’t try to circumvent the rules by artificially reducing the staff to fewer than 100 employees.
Large employers (100 or more full-time employees): The January 1, 2015 deadline still applies to this group, but there’s some good news for large employers, too. To avoid any penalties, they were initially required to provide coverage to 95 percent of their full-time employees in 2015. But the new regulations lowered the standard to 70 percent for 2015 before increasing the requirement to 95 percent in 2016.
The new regulations address a slew of other issues, including clarifications of the definition of a “full-time employee.” For instance, volunteers to government units and not-for-profits, like local firefighters and emergency personnel, and seasonal workers (i.e., those working less than six months a year) generally won’t be treated as full-time employees. In addition, an employer may base the determination as to whether it employs 100 full-time employees by using a six-month period instead of an entire year. The new final regulations also feature transitional rules designed to smooth out the transition under Obamacare.
Finally, the latest guidance from the Treasury Department incorporates certain provisions included in proposed regulations on the employer mandate issued in December 2012, such as the ability to “look back” at the previous year to determine the status of workers and the use of safe harbor rules governing the affordability of coverage offered to workers.
Undoubtedly, we haven’t heard the last word on this subject. Besides promising to issue final rules simplifying the reporting requirements for employers, the government hasn’t ruled out any further extensions. We will keep our eyes and ears wide open.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.