GM 14-025

Preparing for the Affordable Care Act's Employer Mandate

The Internal Revenue Service (IRS) recently published final rules on the coverage and reporting requirements of the Affordable Care Act’s Employer Mandate. The Employer Mandate requires that “applicable large employers,” which are employers with 50 or more full-time employees, offer a certain level of coverage to full-time employees and their dependents beginning in 2015.

The Final Rule announced two important delays in the rule. Employers with 50-99 employees that meet eligibility requirements may delay implementation of the Employer Mandate until 2016, and employers with 100 or more employees will not be assessed penalties in 2015 if they offer coverage to at least 70 percent of full-time employees.

However, employers should start preparing now to implement the Employer Mandate. Once the Employer Mandate goes into effect, employers will be assessed hefty penalties for failing to offer coverage to at least 95 percent of all full time employees and their dependents, or for offering coverage that is not affordable or that does not provide a certain minimum value. Employers will have only three months to offer the required coverage to new employees, and beginning in 2014 group health plans (including self-insured plans) or health insurance issuers offering group health insurance may not impose waiting periods of more than 90 days.

Tribal employers should also begin the process of determining which entities must offer coverage. Entities with fewer than 50 employees may be subject to the Employer Mandate if they are part of a commonly controlled group of entities that employs more than 50 full-time employees. Employers are treated as a single entity if they would be treated as such under the Employee Retirement Income Security Act (ERISA) controlled group rules. It remains unclear how these rules applies to tribes, and until the IRS issues further guidance, tribes are entitled to apply a reasonable, good faith interpretation of the applicable provisions.

The Employer Mandate also imposes reporting requirements on insurers, including employers that have self-insured group plans, and on applicable large employers. The IRS’s final rule on reporting requirements provides for simplified reporting for employers that meet coverage qualifications above and beyond those required to avoid Employer Mandate penalties.

Please let us know if we may provide additional information regarding these new rules.