Employer-Shared Responsibility Tax Delay in Part

On February 10, 2014 the Obama Administration released their final regulations for the Employer-Shared Responsibility Tax,

commonly known as the “Play or Pay” tax. In an effort to be more flexible and help small employers have more time to comply with these complex regulations, a delay of their applicability for employers that have more than 50 but less than 100 Full-Time equivalent employees has been created and adopted in the new regulations.

Initially any “Applicable Large Employer” was subject to the regulations beginning on January 1, 2015. Applicable Large Employer was defined as an employer that employed 50 or more Full-Time equivalent employees in the preceding year. The delay would now allow any employer with 50 to 99 Full-Time equivalent employees to avoid the regulations in 2015; however they would be required to comply in 2016. This does not alleviate the need for employers to be prepared even if they have less than 100 Full-Time equivalent employees.

The second major change to the regulations for 2015 is that instead of an employer being required to offer coverage to at least 95% of their Full-Time employees to be in compliance with regulations, they now only have to offer coverage to at least 70% of their Full-Time employees. Then beginning in 2016 the 95% standard will begin to apply.

Please note the following has been finalized:

  • Employers will be required to use Measurement, Administrative, and Stability Periods to determine, demonstrate and document which employees are Full-time and which employees are Non Full-Time,
  • Employers with plan years that do not start on January 1 will be able to begin compliance with employer responsibility at the start of their plan years in 2015 rather than on January 1, 2015, and the conditions for this relief are expanded to include more plan sponsors,
  • Employers can determine whether they had at least 100 Full-Time or Full-Time Equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year.

This is welcome relief for many employers and at the same time may lead to more confusion. Companies need to act now to outline, document and implement their ACA compliance plan. Setting up and tracking through Measurement, Administrative and Stability Period is complicated and requires a thoughtful approach and dynamic solution.

These are just a few of the important details that were adopted in the final regulations. This is a brief overview of what these delays and final regulations mean for employers. SyncStream will have much more to come on this topic.