Yesterday, IRS officials made a significant announcement that impacts the Employer Shared Responsibility requirements, also known as the Employer Mandate. New guidance issued by the IRS confirms that a new phased approach will be utilized to implement it.

The new approach has 3 significant changes to the previously written rules:

1. Employers with 50-99 full-time equivalent employees can receive an exemption from the Employer Mandate in 2015 if certain requirements are met. The exemption does not apply if an employer adjusts its workforce size or hours of service for the sole purpose of receiving an exemption from the Employer Mandate. These types of adjustments are permitted for bona fide business reasons. There are also other eligibility requirements that must be met to qualify for an exemption.   
2. The Employer Mandate will generally apply to employers with 100 or more full-time equivalent employees in 2015. For the year 2015, employers subject to the Employer Mandate will not be required to pay a penalty on 80 of the employees if they fail to meet the coverage offer requirements (i.e. an employer with 120 employees would only be subject to making a penalty payment for 40 of the employees).
3. Employers subject to the Employer Mandate in 2015 will need to offer coverage to at least 70% of full-time employees to avoid financial penalties. Coverage must also meet minimum value and affordability guidelines as previously defined in the law to avoid financial penalties.

In 2016, the Employer Mandate will be fully phased in, and all employers with 50 or more full-time equivalent employees will be subject to the rules. These employers will also have to provide coverage to at least 95% of full-time employees starting in 2016 to avoid financial penalties.

It should be noted that new employer reporting requirements have not been delayed or changed. Employers with 50 or more full-time equivalent employees will need to fulfill new reporting obligations for the 2015 calendar year. More details on the reporting requirements are expected later this year. 

The new IRS guidelines can be found in the section XV.D.6 and XV.D.7 at the following link: https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf

We will continue to review this new guidance and provide additional updates as necessary. In the meantime, subscribe to our blog for timely healthcare reform updates.

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.