Newly issued proposed rules and a set of related questions and answers provide guidance for employers regarding the shared responsibility (“pay or play”) requirements under Health Care Reform. Under the proposed rules, an employer who is subject to the requirements would generally be treated as offering coverage to its full-time employees for a calendar month if, for that month, it offers coverage to at least 95% of its full-time employees.
Beginning in 2014, employers with 50 or more full-time employees (including full-time equivalents) may be required to pay a penalty tax, also known as a “shared responsibility payment,” if any of the employer’s full-time employees are certified to receive a premium tax credit or cost-sharing reduction for enrolling in coverage through a Health Insurance Exchange.
Determining Whether the Penalty Applies
Under the proposed rules, an employer who meets the 50 full-time employee threshold would be liable for the penalty only if:
- The employer does not offer health coverage or offers coverage to less than 95% of its full-time employees, and at least one of the full-time employees receives a premium tax credit; or
- The employer offers health coverage to at least 95% of its full-time employees, but at least one full-time employee receives a premium tax credit, which may occur because the employer did not offer coverage to that employee or because the coverage offered was either unaffordable or did not provide minimum value.
After 2014, these provisions would apply to large employers that do not offer health coverage or that offer coverage to less than 95% of their full time employees and the dependents of those employees. (Note that “dependent” is defined in the proposed rules as an employee’s child who is under 26 years of age, and does not include an employee’s spouse).
Other Key Issues Addressed in the Proposed Rules
Additional issues addressed in the proposed regulations include:
- Determining which employers are subject to the “pay or play” requirements;
- Determining who is a full-time employee, including approaches that can be used for employees who work variable hour schedules, seasonal employees, and teachers who have time off between school years;
- Determining whether coverage is affordable and provides minimum value; and
- Calculating the amount of the penalty due and how the penalty will be assessed.
The proposed rules also provide a number of transition relief provisions, including for employers sponsoring plans that do not operate on the calendar year (i.e., fiscal year plans), as well as relief to help employers that are close to the 50 full-time employee threshold determine their options for 2014.
Employers may rely on the proposed rules for purposes of compliance with the “pay or play” requirements; any final rules that are more restrictive will be applied prospectively and employers will be given sufficient time to come into compliance.