Question: One of my clients has 75 employees and has never offered health coverage to its employees and it does not plan do so in the future. When would it have to comply with the employer mandate, 2015 or 2016?
Answer: January 1, 2016 For employers eligible for the transition relief described below, no subsection (a) or subsection (b) penalty will apply for any calendar month during 2015 or any calendar month during the portion of the 2015 plan year that falls in 2016.
An employer is eligible for this transition relief if it satisfies the following conditions:
i. Limited Workforce Size
The employer employs on average at least 50 full-time employees (including full-time equivalent employees) but fewer than 100 full-time employees (including full-time equivalent employees) on business days during 2014.
ii. Maintenance of Workforce and Aggregate Hours of Service
During the period beginning on February 9, 2014 (the date of the issuance of the final regulations) and ending on December 31, 2014, the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition set forth above. A reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition.
iii. Maintenance of Previously Offered Health Coverage
Except as otherwise provided herein, during the coverage maintenance period the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. An employer will not be treated as eliminating or materially reducing health coverage if (a) it continues to offer each employee who is eligible for coverage during the coverage maintenance period an employer contribution toward the cost of employee-only coverage that either (1) is at least 95% of the dollar amount of the contribution toward such coverage that the employer was offering on February 9, 2014, or (2) is the same (or a higher) percentage of the cost of coverage that the employer was offering to contribute toward coverage on February 9, 2014; (b) in the event there is a change in benefits under the employee-only coverage offered, that coverage provides minimum value after the change; and (c) the employer does not alter the terms of its group health plans to narrow or reduce the class or classes of employees (or the employees’ dependents) to whom coverage under those plans was offered on February 9, 2014.
iv. Certification of Eligibility for Transition Relief
The ALE certifies on a prescribed form that it meets the eligibility requirements set forth above. The final regulations under Code § 6056 provide that an ALE, or an ALE member, that otherwise qualifies for this relief must provide this certification as part of the transmittal form it is required to file with the IRS under the Code § 6056 regulations, in accordance with the instructions to that transmittal form.
In conversations with the IRS, Mr. Thomas Reeder, Health Care Counsel in the IRS Office of Chief Counsel, indicated that if the employer didn’t manipulate its workforce size and health coverage just to get into the transition relief, it would be able to use the transition rule for 2015 and will not be subject to the employer shared responsibility requirement until 2016. Note that the employer will still have to report for 2015 (and on the Form 1095-C they have to indicate they are eligible for this relief).