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February 11, 2014

Affordable Care Act Delayed Until 2016 for Mid-Size Businesses

On February 10, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Affordable Care Act (ACA) that take effect in 2015.  This update to the ACA delays the so-called shared-responsibility requirement for employers who have 50 to 99 full-time equivalent employees.  These employers now have until January 1, 2016 to offer health insurance or pay a penalty.

Last July, the IRS postponed the shared-responsibility penalty to 2015 (its original effective date was 2014).  The regulations announced Monday further delay the penalty for one year for mid-size employers.

Based on the number of employees, an applicable employer is subject to a potential penalty if its employer-sponsored health coverage does not provide “minimum essential coverage” or is not affordable relative to the employee’s household income.

How This Policy Affects Employers

  • Small Businesses with fewer than 50 employees (about 96% of all employers):  Under the ACA, companies that have fewer than 50 employees are not required to provide coverage or fill out any forms in 2015, or in any year, under the ACA.

  • Employers with 50 to 99 employees (about 2% of employers):  Companies with 50-99 employees that do not yet provide quality, affordable health insurance to their full-time workers will just report on their workers and coverage in 2015, but have until 2016 before any employer shared-responsibility penalty could apply.

  • Larger employers with 100 or more employees (about 2% of employers):  The overwhelming majority of these companies with 100 or more employees already offer quality coverage.  Today’s rules phase in the percentage of full-time workers that employers need to offer coverage to from 70 percent in 2015 to 95 percent in 2016 and beyond.  Employers in this category that do not meet these standards will pay an employer shared-responsibility penalty for 2015.

The Department of the Treasury also announced in a press release that it intends to issue final regulations soon that will streamline the reporting requirements “for employers that offer highly affordable coverage to all or virtually all of their full-time employees.”

If you are currently considering your options with regard to the ACA, you will need to factor in this postponement as well as the uncertainty of possible future changes to the implementation of this complex law.  Should you have any questions about this new development, please contact Rob Swenson at rswenson@orba.com or call him at 312.670.7444.