Global Tax Insights
Does my Company Qualify for Transitional Relief Under the ACA “Play or Pay” Regs?June 09, 2014
An easy to understand overview that will help you determine if you qualify.
Relief for midsize employers. Under the final regs of the ACA, eligible midsize employers will not be subject to the play-or-pay provision until 2016. To qualify for the midsize-employer penalty relief, an employer must:
- Employ on average fewer than 100 full-time employees or the equivalent during 2014,
- Maintain its workforce size and aggregate hours of service (meaning the employer may not reduce its workforce or overall hours of employee service to qualify),
- Maintain the health care coverage it offered as of Feb. 9, 2014, and
- Certify that it meets these requirements.
Be aware that these employers will still be subject to the ACA’s large-employer information-reporting requirements in 2015.
Relief for larger employers
Under the ACA, large employers that don’t offer at least 95% of their full-time employees minimum essential health coverage will be assessed a penalty if one of their full-time employees receives a premium tax credit when buying health care insurance from an insurance exchange. The annual penalty is $2,000 per full-time employee in excess of 30 full-timers.
The final regs state that large employers that don’t qualify for the midsize-employer penalty relief in 2015 can avoid the penalty by offering for not offering minimum essential coverage to at least 70% of their full-time employees. The 95% requirement will apply in 2016 and beyond.
Extra preparation time
The final regs extend and expand transitional relief in other ways as well, such as the following:
- In preparing for 2015, employers can determine whether they had at least 100 full-time employees or the equivalent in 2014 by reference to a period of at least six consecutive months (instead of a full year).
- Employers with plan years that don’t start on January 1st can begin compliance with the play-or-pay provision at the start of their plan years in 2015.
- The requirement to offer coverage to full-time employees’ dependents will not apply in 2015 if an employer is taking steps to arrange for such coverage in 2016.
The IRS indicated it will consider whether it’s necessary to extend beyond 2015 any of the transitional relief provided by the final regs. Nevertheless, the relief shouldn’t be regarded as permission to procrastinate. Rather, midsize to large employers should use the additional time to decide whether to offer full-time employees coverage that will allow them to avoid the risk of incurring penalties.
For more information on the regulations and qualification requirements please contact any member of the Healthcare Services Group.
For more information on the ACA regs read our related blog "What is Transitional Relief Under the Final ACA 'Play or Pay' Regulations".