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The Internal Revenue Service (IRS) announced on Feb. 10, 2014, that it will delay enforcement of the Employer Mandate as it applies to certain employers and will permit larger employers to offer coverage to a lower number of full-time employees in 2015.

The Patient Protection and Affordable Care Act (Health Care Reform) requires an employer with at least 50 full-time equivalent employees to:

  • Offer health care coverage to substantially all of its full-time employees; and
  • Offer affordable health care coverage providing minimum benefits to all of its eligible full-time employees.

Failure to meet either of these requirements results in the imposition of a penalty. This is the employer shared responsibility requirement, often referred to as the “Employer Mandate.”

Technically, the Employer Mandate is effective currently in 2014, but the IRS delayed enforcement of the employer penalties until 2015. Health Care Reform’s “Individual Mandate,” which requires individuals to have health care coverage or pay a penalty, is still in force for 2014.

In the preamble to the final regulations on the Employer Mandate released on Feb. 10, 2014, the IRS announced a phase-in of the enforcement of the Employer Mandate penalties for 2015. The IRS also reiterated that the Employer Mandate does not apply to employers with fewer than 50 full-time equivalent employees.

The phase-in will work as follows:

  • Employers with at least 50 but less than 100 full-time equivalent employees will not be subject to the Employer Mandate penalties until 2016 provided:
    • The employer certifies that it did not reduce its workforce to drop below the 100 full-time equivalent employee threshold; and
    • The employer certifies it has not eliminated or materially reduced its health care coverage.
  • Employers with 100 or more full-time equivalent employees will be subject to the Employer Mandate penalties in 2015. However, an employer in this group will only need to offer coverage to at least 70 percent of its full-time employees (instead of 95 percent of its full-time employees) to avoid the penalty for not offering coverage to substantially all of its full-time employees ($2,000/year for every full-time employee). Beginning in 2016, the 95 percent threshold will apply.
  • Employers with 100 or more full-time equivalent employees will still be subject in 2015 to the potential penalty of $3,000/year for any full-time employee to whom the employer does not offer affordable health care coverage providing minimum benefits; no transition relief has been announced for this penalty for 2015.

The final regulations contain a number of revisions and clarifications regarding the Employer Mandate, including additional transition rules for employers with fiscal year (instead of calendar year) group health plans. We will address those in future alerts.

For more information, please contact:

Antoinette M. Pilzner

Dale R. Vlasek

John M. Wirtshafter

Benefit programs should be a win-win for employers and employees. We strive to accomplish that goal in the design, implementation and operation of sophisticated benefit and executive compensation programs—qualified and non-qualified retirement programs and health and welfare plans. Our employee benefits team has a long track record of working to maximize the efficiency and economic feasibility of each program.