Less than one year remains before most businesses will be required to offer health benefits to their workers as part of President Obama's healthcare law, and the Department of Treasury and IRS have moved forward on implementing the law's employer mandate provision, publishing a 144-page proposed regulation that outlines employers' responsibilities and coverage requirements. The regulation details requirements for full-time, part-time and seasonal workers along with how the employer mandate penalty is calculated.
To help employers better understand the regulation, the IRS created a Q&A addressing the basics of the employer shared responsibility provisions. In the Q&A, the IRS stated that beginning Jan. 1, 2014, large employers that do not offer "affordable" health plans that provide a minimum level of coverage to their full-time employees may be subject to a penalty if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges. "Affordable" means healthcare benefits can't cost a single worker more than 9.5 percent of his or her income.
The provisions apply to an employer with at least 50 full-time employees or a combination of full-time and part-time employees that is equivalent to at least 50 full-time employees--for example, 100 half-time employees equals 50 full-time employees. Under the law, a “full-time employee” works an average of at least 30 hours per week, so half-time is 15 hours per week.
If an employer offers coverage to at least 95 percent of its eligible full-time employees, it will be subject to the $3,000 per year mandated penalty for each employee that is not offered affordable coverage and receives a premium credit when enrolling in an exchange provided plan. If an employer does not offer coverage to at least 95 percent of its eligible full-time employees, it will be subject to a $2,000 per year penalty multiplied by all of its employees (minus the first 30 employees) regardless of whether any of those employees are eligible for employer-provided coverage. Fortunately, the regulation does not penalize large employers that intend to offer coverage to all of their full-time employees but fails to offer coverage to a few full-time employees. This provision is intended to avoid penalizing employers for administrative errors.
NATSO recently covered the healthcare law and its effect on small businesses in Stop Watch magazine.
The Department of Treasury and the IRS are accepting comments on the proposed rules until March 18, 2013. The full proposal along with information on how to comment is available in the Federal Register.
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