Thursday, January 8, 2015

The Employer Shared Responsibility Requirement in 2015

Now that 2015 is upon us, it is useful to revisit the circumstances under which an employer may be subject to an employer shared responsibility payment under the Patient Protection and Affordable Care Act (the “ACA” or “Obamacare”).  Generally speaking, employers with fewer than 50 full-time-equivalent (fte) employees will not be subject to an employer shared responsibility payment in 2016 because they did not provide health insurance to full-time employees and their dependents during 2015.  Also during 2015 (encompassing all calendar months during the 2015 plan year, including months during the 2015 plan year that fall in 2016), employers with at least 50 but fewer than 100 fte employees will not be subject to a shared responsibility payment if they can certify that the following conditions were met during 2014:  (1) limited workforce size (meaning that it met the size requirements for all of 2014); (2) maintenance of workforce and aggregate hours of service (meaning that the employer did not cut its workforce to meet the 2015 exception); and (3) maintenance of previously offered coverage.

For applicable large employers (meaning those employers with 100 or more fte employees during 2014 or who had between 50 and 99 employees during 2014 but cannot certify that they meet the transitional rule conditions), employer shared responsibility payments will be due to the IRS in 2016 if:  (1) the employer does not offer health coverage or offers health coverage to less than 70% of its full-time employees and their dependents, and at least one of the employer’s full-time employees receives a premium tax credit as a result of having sought coverage in the Marketplace; or (2) the employer does offer health coverage to at least 70% of its full-time employees but at least one full-time employee receives a premium tax credit to help pay for coverage in the Marketplace, either because the employer did not offer coverage to that employee or because the coverage was not affordable (i.e., the employee’s share of employer-provided employee-only coverage would cost the employee more than 9.5% of the employee’s annual household income, which may be determined by proxy by reference to box 1 of the employee’s W-2 form)  or did not meet the minimum value requirement.  Note that the 70% figure becomes 95% for calendar or plan years 2016 and beyond.

It should be noted that Congress is currently addressing the ACA’s definition of full-time employee, which may affect compliance issues for 2015.  Bills in both houses of Congress would amend the ACA to provide that a full-time employee is one who works an average of 40 hours a week (instead of 30).  While the Republicans now have a majority in both houses, such an amendment would have to have some Democratic support in order to insure that the amendment could survive a Presidential veto.  In addition, even some Republicans are reported to have reservations about the amendment.  Therefore, employers should not count on the prospect that this proposed amendment will become law during 2015 and thus change their obligations under the ACA.

Finally, it is worthy of note that the role of the W-2 form will increase substantially in 2016, not only for purposes of determining affordability of coverage but also for purposes of reporting the value of the insurance coverage provided to employees.  Accordingly, employers should work with their insurers or third-party administrators to be sure that required information is available for inclusion on W-2 forms to be issued in 2016 for tax year 2015.  Future issues of the Workplace Report will deal more extensively with 2016 employer reporting requirements that will depend in substantial part on information generated during 2015.