Global Tax Insights
What is Transitional Relief under the Final ACA “Play or Pay” Regulations?June 06, 2014
Relief; simplified and explained.
The IRS has released its final regulations implementing the Affordable Care Act’s (ACA’s) employer shared-responsibility — also known as “play or pay” — provision that applies to “large” employers. The final regs push out one year, from 2015 to 2016, the risk of play-or-pay penalties for eligible midsize employers that otherwise would be considered large employers under the ACA. They also provide other significant relief for 2015.
Play-or-pay in a nutshell
The play-or-pay provision imposes a penalty on large employers that don’t offer “minimum essential” health care coverage — or that offer coverage that isn’t “affordable” or doesn’t provide at least “minimum value” — to their full-time employees (and their dependents) if just one full-time employee enrolls in a qualified health plan through a government-run health insurance exchange and receives a premium tax credit.
Under the ACA, a large employer is one with at least 50 full-time employees or a combination of full-time and part-time employees that’s equivalent to at least 50 full-time employees. This involves totaling part-time employees’ monthly hours and dividing that figure by 120 to calculate full-time equivalent employees (FTEs). That figure is then added to the total number of actual full-time employees. A full-time employee generally is someone employed on average at least 30 hours a week, or 130 hours in a calendar month.
To learn more about the ACA please contact me at firstname.lastname@example.org.
Read our related blog "Does my Company Qualify for Transitional Relief Under the ACA “Play or Pay” Regs" to learn more.