Treasury Department Delays Employer Mandate for Small Employers; Lower Threshold for Avoiding Penalties

May 16, 2014

This afternoon the Treasury Department announced that employers with 50 or more full-time equivalent employees (FTEs), but less than 100 FTEs, will not have to comply with the employer mandate of the Affordable Care Act until 2016. The determination of whether an employer meets the small employer requirements for this purpose would be based on 2014 headcounts. So, if an employer employed on average 50 or more FTEs during 2014, but less than 100 FTEs, that employer will not be subject to penalties for 2015. However, this small employer will have to report what coverage is offered to employees for 2015, that obligation will not change.

For employers with 100+ FTEs in 2014, the mandate will still apply in 2015. However, these larger employers will have a lower threshold in determining whether the penalty can be avoided. For 2015 only, an employer can avoid the no coverage penalty if coverage is offered to at least 70% of full time employees, rather than 95%. For 2016, the threshold will revert to 95%.

The Treasury Department estimates that the carve out for smaller employers (50 but less than 100 FTEs) will affect 50% of all employers subject to the pay or play mandate.

It is important to note that the delay discussed above is found in final regulations with respect to the employer mandate which were issued today, February 10, 2014. These final regulations were much anticipated and provide final guidance on, among other things, how to determine full time employees, whether an employer is an applicable large employer for purposes of the mandate, and whether offered coverage is affordable coverage.

We will provide updates to our clients and friends with an analysis of today’ s final regulations shortly.

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