The employer mandate – What you need to know

The employer mandate – What you need to know

You may have heard about the employer mandate in the Affordable Care Act (a.k.a., health care reform law). But what exactly is it, and who has to comply?

The Department of Treasury has released some initial rules so companies can begin planning, until the Internal Revenue Service releases final rules.  Here are some of the main rules:

Impact on businesses:
• Businesses with 50 or more full-time employees (including full-time equivalents) must offer a mandated minimum level of coverage that people can afford. These companies are considered “applicable large employers.”
• This mandate goes into effect for new or renewing plans starting January 1, 2015.

If “applicable large employers” don’t follow the employer mandate, they must pay:
• $2,000 per year per full-time employee (after the first 30) if any full-time employee gets government aid to lower his or her coverage cost through the health insurance marketplaces (a.k.a., exchanges) because minimum essential coverage wasn’t offered.
• $2,000 per year per full-time employee (after the first 30) – or $3,000 per subsidized full-time employee, whichever is less – if coverage is not considered affordable (which has been defined as meaning that employee contribution costs for single coverage exceed 9.5% of the employee’s yearly earnings).

Here are definitions of a few key terms about the employer mandate:

Applicable large employers: Those with 50 or more full-time employees (including full-time equivalents). To find out if you are an applicable large group employer*:
1. Add the number, month by month from the past year, of all employees that are full-time, full-time equivalent and seasonal.
2. Divide the total number of employees for the year by 12.
3.  If the result is not a whole number round down to the next lowest whole number.
4. If the result is less than 50, the company is not an “applicable large employer” for the current calendar year.

•  Full-time employee: Employee who works an average of at least 30 hours per week.
•  Hours of service: Hours paid for performing work or the right to be paid when no work is done – e.g., for paid time off for illness, vacations, holidays, etc.

We will keep you up-to-date on how this mandate may affect you as the final rules are released by the government.

For more information about the employer mandate and other health care reform topics, any time.

* Offer of coverage, affordability safe harbors and assessable payments – Notice 2012-58 lists methods employers may use when calculating coverage offerings, conditions for using an affordability safe harbor and assessable payments. The rules depend on a variety of factors such the type of employer and employees (hourly, salary, seasonal, etc), unpaid employee leaves, look-back periods, etc.

This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.