The Affordable Care Act’s (ACA) employer mandate is delayed until Jan. 1, 2015. The employer-shared responsibilities of the ACA, also referred to as “pay or play” rules, impose penalties on large employers that do not offer affordable, minimum value coverage to their full-time employees and their dependents. For purposes of these rules, a large employer is one that employs on average at least 50 full-time employees (including full-time equivalents) on business days during the preceding calendar year.
Smart Business spoke with Amy Broadbent, vice president at JRG Advisors, the management arm of ChamberChoice, about what employers can expect with this delay.
What does this delay allow employers to do now?
The pay or play rules were originally set to take effect Jan. 1, 2014. The delay will provide business owners additional time to understand the rules and make decisions about providing health care coverage, including:
- A final determination as to the number of full-time equivalent employees.
- The look-back period that will be the basis for the calculation and coverage requirements.
- The decision to ‘play’ — sponsor employee health insurance, or ‘pay’ — pay the penalty for not sponsoring employee health insurance.
- An opportunity to compare the plans and pricing available on the insurance marketplace (public exchange) versus what is available in the private marketplace.
Why did the federal government decide to hold off on implementing certain provisions?
According to the U.S. Department of Treasury, the delay of the employer mandate penalties was required because of issues related to the reporting requirements and rules that apply to insurers, self-insuring employers and other parties that provide health coverage. The administration’s decision was based on concerns about the complexity of the requirements and the need for more time to implement them effectively.
The additional implementation period will be used to consider ways to simplify the new reporting requirements with the ACA. With these rules delayed, it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions. Therefore, these payments will not apply for 2014.
What about the rest of the health care reform law?
The delay does not affect any other provisions of the ACA, including an individual’s access to premium tax credits or coverage through an exchange. Open enrollment within the public insurance marketplace is scheduled to begin Oct. 1, 2013, so that individuals not insured otherwise can have coverage in place by Jan. 1, 2014.
It is uncertain how the new deadline will impact guidance that has already been issued.
Although the employer mandate is delayed, many employers have non-calendar year benefit plans — meaning their contract renewal date could come prior to Jan. 1, 2015 — and will want to be in compliance with the ACA prior to Jan. 1, 2015.
What are employers’ next steps?
Employers should consider ‘staying the course’ and continue to plan and implement a strategy beginning Jan. 1, 2014. If nothing else, these employers will have gained a year of experience in addressing cost-sharing, coverage requirements, employee perception and reaction to the employer-sponsored plan versus the public marketplace, administrative issues, etc. They will be in a better position beginning Jan. 1, 2015.
On the other hand, if the delay would be deemed unconstitutional at some point later this year or next, and the penalties would take effect Jan. 1, 2014, these employers will find themselves protected.
The pay or play regulations issued earlier this year left many unanswered questions for employers. The employer mandate delay gives the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements. Your adviser should continue to monitor developments and keep you informed of the latest updates.
Amy Broadbent is a vice president at JRG Advisors, the management arm of ChamberChoice. Reach her at (412) 456-7250 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice