On Jan. 2, 2013, the U.S. Internal Revenue Service (IRS) issued a Notice of Proposed Rulemaking (NPRM) regarding the employer mandate provision of the Affordable Care Act (ACA). This provision goes into effect on Jan. 1, 2014, although there is some transition relief for plans that do not operate on a calendar-year basis. The IRS also released a series of questions and answers highlighting the key provisions in the NPRM. The proposed regulations explain how employers should determine if they are subject to the employer mandate of the Act – the so called “pay or play” rules, how to determine which employees are considered “full-time employees,” and how the employer penalty would be calculated and paid. While this rule is not yet final, it is considered by the IRS to be guidance for employers and can be relied upon through 2014. The proposed rule can be found in the Federal Register.
One of the most noted clarifications in the proposal is the requirement for large employers to offer coverage not only to full-time employees but to their dependents as well. While the cost of coverage for the employee must not exceed 9.5% of the annual household income for the purchase of his or her own coverage, this is not a requirement for coverage offered to dependents – a relief for employers who do not wish to pay for dependent coverage. It is important to note that spouses are not considered dependents under this definition and are not required receive an offer of coverage.
The NPRM also clarifies the definition of “large employer” and explains how multiple employers within a one controlled group should determine if they must comply with the requirements of the law, and if so, how penalties will be assessed for non-compliance. Additional topics covered include:
- Changes in employment status from part-time or seasonal to full-time;
- Treatment of rehired employees and others with service breaks;
- Counting paid leave for the purposes of determining “full-time” status;
- Counting hours worked by foreign employees;
- Penalty assessments for employers when employees fail to pay their portion of the insurance premium;
- Safe harbors for determining affordability; and
- Transition relief options for employers.