“Play or Pay”

The following commentary pertains specifically to the portion of the Employer Mandate under the “Patient Protection and Affordable Care Act (ACA),” also known as “Play or Pay,” in determining employer size and what every employer should be planning for at this juncture in 2014 to prepare for  2015 and 2016.

The final regulations published on February 10, 2014 gave employers transitional rules to get them into or through the next two years. Employers with 1 to 49 full time equivalent employees will not have to comply with the employer mandate; those with 50 to 99 will be allowed to wait until 2016, if they certify that they can meet particular conditions (which we will not cover in this article). Those employers with 100 or more employees will have to comply in 2015.  With those facts in mind, we will now focus on the rules to determine an employer’s size:

There are “transition” rules which allow an employer to pick any consecutive 6 months in 2014 to determine their size for 2015.  Beginning in 2016, the entire preceding calendar year will determine your size for the following year.

To determine if employer is an Applicable Large Employer (ALE) for 2015:

  1. Select the 6 consecutive months in 2014 to be used in the calculation;
  2. Total each full time (FT) employee working 30 hours or more for each of those 6 months, 30 or more hours is FT under ACA rules;
  3. Total the hours worked by all part-time (including seasonal) workers for each of those same months and divide by 120, IRS definition, the result will be the full time Equivalent (FTE);
  4. Total the amounts from steps 2 & 3 for each month, then divide by 6 to determine the average employee count for ALE purposes. If 50 or more, then employer is ALE
  5. If Seasonal Workers working 120 days or less cause employer to be an ALE they can be backed out to avoid the mandate for 2015

For 2016 and each year thereafter, employers will use the entire prior calendar year, no matter when their plan year might be, to determine whether the mandate applies. Seasonal workers working 120 days or less can be backed out each of those years if they cause an employer to become an ALE.

The final regulations also provided transitional rules as to whether an employer can keep its plan year, or have to comply by January 1, 2015 or January 1, 2016, but those ALE’s currently not offering a health plan will have to comply at the beginning of either 2015 or 2016 depending on size.  There were 272 pages of preamble and rules that were issued on February 10th regarding the Employer Mandate and this is just one portion… It is important that every employer sit down now and work with their broker/consultant or legal counsel and determine which 6 consecutive months in 2014 should be used for 2015, and what size you can expect to fall into and plan accordingly.

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