Compliance Deadline Summary
Please see below for detailed information regarding the final Employer Mandate regulations. To assist with your ACA strategy and planning, we also recommend reading our White Paper/FAQ booklet The Affordable Care Act: What You Need to Know . It contains detailed FAQs and the latest ACA information as it applies to the entertainment industry.
Please read this important ACA alert for provisions that may impact your company’s obligations under the Affordable Care Act (ACA).
On February 10, 2014, the U.S. Treasury Department and IRS issued the final regulations implementing the employer-shared responsibilities (Employer Mandate) under the ACA. These regulations revise some important employer compliance requirements that take effect in 2015 and feature some significant changes that will impact the entertainment industry.
Key highlights are featured below, followed by greater explanation. A more detailed analysis will be issued pending a complete analysis of the regulations.
Employers that average at least 50 but fewer than 100 full-time/full-time equivalent employees in 2014 generally will not be subject to the Employer Mandate obligations until the first day of the employer’s health plan year beginning in 2016.
On a one-time basis, an employer can use a 6-consecutive month period in 2014, rather than the entire year, to determine if it meets the 100 full-time/full-time equivalent employee threshold.
For 2015 only, Employers with 100 or more full-time/full-time equivalent employees need only offer coverage to 70 percent of their full-time workers in 2015, instead of the previously-required 95 percent, to avoid the $2,000 annual penalty for each full-time employee. However, other penalties will still apply to employers who fail to offer coverage to all full-time employees.
For 2015 only, an employer with at least 100 full-time employees that is subject to the $2,000 annual penalty for failing to offer compliant coverage to at least 70 percent of its full-time workforce is entitled to a safe harbor exclusion of 80 instead of 30 full-time employees.
Employers may treat a re-hired or recalled employee as a new employee for ACA purposes if the employee failed to have a paid hour of service for 13 weeks (or, if shorter, a period of at least four weeks and as long as the preceding period of employment).
- Medium-Size Employer Exception for 2015
Employers that average at least 50 but fewer than 100 full-time/full-time equivalent employees in 2014 generally will not be subject to the Employer Mandate obligations until the first day of the employer’s health plan year beginning in 2016. The employer is required to certify that it did not reduce its workforce below the 100 full-time/full-time equivalent employee threshold to avoid the Employer Mandate in 2015, and that it did not cancel or materially alter any group health plan coverage in effect on February 9, 2014. Employer size continues to be determined on a “controlled group” (i.e., production family) basis, and takes into account not only actual full-time employees but also “full-time equivalent employees” who are determined by tallying hours worked by part-time employees in a month and dividing by 120. As with the initial proposed rules, companies will need to combine corporate and production workers inside their controlled group in determining whether they satisfy the medium-size employer exception for 2015.
- Special Transition Measurement Period for 2015
Other special rules govern how to determine an employer’s size. Normally, the employer tallies its average number of full-time/full-time equivalent employees on the business days of the prior year. However, on a one-time basis, an employer can use a 6-consecutive month period in 2014, rather than the entire year, to determine if it meets the 100 full-time/full-time equivalent employee threshold.
- 70 Percent Threshold for $2,000 Annual Penalty
Employers with 100 or more full-time/full-time equivalent employees will still be subject to the Employer Mandate starting in 2015. These employers need only offer coverage to 70 percent of their full-time workers in 2015, instead of the previously-required 95 percent, in order to avoid the penalty for failing to offer coverage to substantially all of their full-time employees ($2,000 annual penalty per full-time employee, minus the first 80 full-time employees in 2015). Starting in 2016, coverage must extend to 95 percent of full-time employees to avoid the $2,000 annual penalty per full-time employee (minus the first 30 full-time employees in 2016 and thereafter).
- Some Penalties Still Apply to Employers Who Fail to Offer Coverage to All Full-Time Employees
While the reduced 70 percent threshold described above might appear appealing, some penalties will still apply to large employers (those who employ 100 or more full-time employees) who fail to offer coverage to all full-time employees. For example, if an employer offers coverage only to 75 percent of its full-time employees, and the full-time employees not offered coverage obtain subsidized insurance from a public exchange, the employer is subject to a $3,000 annual penalty for each full-time employee who obtains such subsidized coverage, capped at what the employer would have been penalized had the $2,000 annual penalty been assessed across all full-time employees (minus the first 80 in 2015 and first 30 in 2016 forward).
- Seasonal Employees Defined
Seasonal employees, defined as those in positions for which the customary annual employment is six months or less generally on a recurring basis, may be treated like “variable hour” employees and have their hours of service averaged over a “measurement period” of up to 12 months, even if they are working full-time. The practical effect of this is that most employers will have no obligation to offer coverage to seasonal employees. Further analysis will be required to determine the applicability of the seasonal employee concept to the entertainment industry.
- Break in Service Reduced to 13 Weeks
Employers may treat a re-hired or recalled employee as a new employee for ACA purposes if the employee failed to have a paid hour of service for 13 weeks (or, if shorter, a period of at least four weeks and as long as the preceding period of employment). This break in service standard is relaxed from the proposed regulations, which defined a break in service as 26 weeks.
- IRS Reporting Regulations
Final regulations will be issued shortly to streamline the employer information reporting requirements related to the Employer Mandate, and we will circulate an ACA Alert as soon as they are issued.
As noted above, a more detailed analysis of the final Employer Mandate rules and their impact on the entertainment industry is forthcoming. More information may also be found here. Meanwhile, please feel free to submit any questions to us at firstname.lastname@example.org or visit our ACA Compliance Center.