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Do Business

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Who Thinks Like You.

Non-Calendar Year Plans; Employers

"Close" To Being “Large”

Employers on a non-calendar year basis for coverage will have

transition relief the first calendar day of the 2015 plan year

with transition relief available for employers “close” to 50

full-time employees.

Transition Relief: Between 50-100


The transition relief rules (really the heart of the recent regs),

do not resolve the issue of when employers will be determined

to be an employer with more (or less) than 100 full-time em-

ployees. (Accordingly, it is important then to start measuring

full-time employees this year.) Also, employers intending to fit

within the 50-99 employee safe harbor must be very careful in

instituting procedures to make sure they are both within this

workforce size and do not take steps to negate this relief as

explained below.

For example, transition relief for "sub-100" employers

is only available where employers do not reduce the size of

their workforce (or hours) in order to qualify for this transition

relief. The concern here is to prevent employers from layoffs or

work hours reduction to fit within this safe harbor. However,

defense is available if the reduction was for a "valid business

reason." The sub-100 safe harbor also requires employees to

maintain previously offered health coverage between the

period starting February 9, 2014 until December 31, 2015. Here,

employers will not be treated as eliminating or (materially

reducing healthcare coverage) if they continue to offer each

employee, eligible for coverage, a contribution towards the

employee-only coverage cost that is at least 95% of the dollar

amount the employer offered on February 9, 2014, and the

employer may not alter the terms of the group health plan to

narrow or reduce the class or the classes of the employees to

whom coverage was offered on February 9, 2014.

In providing such transition relief in 2015 for employers

with less than 100 full-time employees, even if employers do

not qualify for this safe harbor, they still will only be liable for

an employer shared responsibility payment if the employer

offers healthcare coverage to fewer than 70% of its full-time

employees. So where a sub-100 employer fails to meet the safe

harbor, it may still avoid a penalty by offering coverage to at

least 70% of its full-time employees.

More Than 100 Employees

While the 2015 transition relief provides that employers with

more than 100 employees can cover 70% of their employees

and not be subject to an employer shared responsibility pay-

ment under 4980H(a), the transition relief does nothing to

prevent a penalty under 4980H(b) for employees who are full

time or an FTE and not offered coverage in 2015. This penalty

depends on whether the non-covered employee obtains a pre-

mium tax credit on an Exchange. If not, then there would be

no penalty under subsection (b); but if so, the penalty would

be $3,000 per employee who receives the credit for 2015. We

note this outcome is inconsistent with IRS press releases but it

is also supported by recent Q and A on the IRS website.

Post 2015

Beginning in 2016, the required percentage of coverage for all

covered employees will increase to 95%. In general, the con-

tinuing delay makes implementation more complex yet still

provides valuable time to comply with the mandate issues.

But employers will still need to track employees for 2014 for

several reasons; including determining what category they fall

into in terms of employer size.

Scope of Coverage; Discrimination

Additionally, the suggestion by the IRS of insuring only 70%

of the workforce in 2015 would indicate there may be "parts"

of workforces that may not be provided coverage. It is still

unclear if discrimination claims apply to "selective" coverage

arrangements under the ACA and whether employees can be

treated differently for coverage purposes.


Presumably, the IRS

will allow employers to have regional differences with work-

forces regarding healthcare coverage, but as of yet guidance

has not been provided.

1 The "highly compensated" discrimination section of the ACA is

still on "hold" as no guidance has been provided.LeClairRyan will

be hosting a free webinar on March 14th at 12 pm to cover the final

regulations. Sign-up at