Last week the Department of Treasury along with the IRS issued some final regulations that give clarity to the Employer Shared Responsibility provisions under section 4980H of the IRS code. This document (TD 9655) lays out the provisions that will go into effect in 2015. Here are some basic things to know.
IRS definition of a large employer
Section 1980H of the IRS code states that a large employer had 50 or more full-time employees, including full-time equivalent employees during the prior calendar year. Full-time equivalent employees (FTEs) are employees that do not work full-time. The IRS determines the number of FTE employees to include in their overall count based on their hours of service. You may be considered as a large employer if you have a combination of 50 or more full-time and part-time employees.
If you employ seasonal workers and those seasonal workers push your employee count over 50 for more than 120 days during a calendar year, they will be taken into account.
When will this go into effect?
January 1. 2015. Employers will have to provide information about their workforce in the 2014 calendar year. There are, however a few transition relief programs in place. These programs include transition relief for employers who have non-calendar year plans, employers who are taking steps to extend coverage to dependents, employers with fewer than 100 full-time employees, and new employers with fewer than 100 employees. For more on the transition relief programs, see the IRS website here.
Employer coverage expectations
Large employers are required to offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents). The Employer Shared Responsibility payment applies if at least one of your full-time employees “receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges”.
The Employer Shared Responsibility payment
Any qualified large employer that fails to offer its full-time employees affordable health coverage with minimum value for a calendar month may be subject to an “assessable payment” if a full-time employee enrolls for that month in a qualified health plan and receives a premium tax credit.
A full-time employee is one who is employed on average 30 hours per week or 130 hours of service per month.
If one full-time employee receives a premium tax credit and the applicable large employer has failed to offer coverage to at least 95% of its full-time employees then the employer owes a payment “equal to the number of full-time employees the employer employed for the year (minus up to 30) multiplied by $2,000.”
For more on the topic, here are two great resources:
Download the official statement here