Affordable Care Act: Pay, Play or Delay

The wait is finally over — the Affordable Care Act (ACA) employer mandate (more commonly called “Pay or Play”) becomes effective for certain “large” employers in 2015. The mandate imposes penalties on “applicable large employers” that choose not to offer ACA-compliant health coverage to most full-time employees. This is a brief summary of several key issues about the new pay or play requirements, including transitional relief that may delay the requirement until 2016.

What Is an “Applicable Large Employer”?

For 2015, employers with at least 100 full-time employees are applicable large employers (ALEs). ALEs will generally become subject to the pay or play mandate beginning January 1, 2015.

Both full-time employees and full-time equivalents are counted for this purpose. A full-time employee works at least 30 hours per week (130 hours per month), while a full-time equivalent is any combination of part-time employees who work at least 120 hours per month. Controlled and affiliated service groups (companies under common control or ownership under the federal tax rules) are treated as one employer to determine whether the group is an ALE.

What Requirements Apply to ALEs?

Beginning in 2015, an ALE may be subject to an ACA penalty if any full-time employee receives premium assistance (tax credits) to obtain coverage from a health insurance exchange. If that happens, one of the following penalties may apply:

• The first penalty will apply only if the employer does not offer health coverage to at least 70 percent of its full-time employees in 2015. For that penalty, the employer will pay $2,000 per full-time employee (except its first 80 full-time employees), prorated monthly.
• A second penalty may be triggered if the employer’s health coverage does not satisfy the ACA’s affordability and minimum value requirements. In that case, the employer must pay $3,000 per full-time employee (prorated monthly) who actually received premium assistance to obtain coverage from an exchange.

This is just the tip of the iceberg. There are also new reporting requirements related to IRS implementation of the ACA’s individual and employer mandates. Be sure to stay on top of these issues as the ACA implementation unfolds.

This article also appeared in RV Focus: A Newsletter for the RV Industry Professional, authored by lawyers who understand the RV industry and take a practical look at legal issues that can affect a company. Legal problems are costly and distracting, and company time is better spent focusing on production, sales, cost control and business relationships.