The final employer shared responsibility regulations issued in February clarified certain periods of time that employers will not be held liable for penalties incurred under the Affordable Care Act for failing to offer qualifying health coverage to a full-time employee.
An employer is potentially subject to a shared responsibility penalty for each month it fails to offer a full-time employee minimum essential coverage that is affordable and provides minimum value. The final regulations, published in the Federal Register Feb. 12, say that penalties will not apply for an otherwise eligible employee during what they refer to as limited non-assessment periods. These exceptions will be allowed provided that minimum value coverage is offered within a certain timeframe.
Employer clients wary of ACA penalties will be looking for clarifications about these non-assessment periods and benefit advisers should know about them.
While employers now have the guidance needed to finalize their employer shared responsibility compliance strategy, “implementing the appropriate measurement method and collecting and reporting the required data will be a significant effort for many employers,” according to Richard Stover and Leslye Laderman of the global HR consulting firm Buck Consultants’ Knowledge Resource Center.
The details of the limited non-assessment periods are:
- The first three full calendar months of employment for a new employee who is reasonably expected to be a full-time employee under the look-back measurement period, or under the monthly measurement method, an employee who is otherwise eligible for an offer of coverage as a full-time employee;
- The employee’s initial measurement period (and the associated administrative period);
- A period of time after an employee experiences a change to full-time employee status during the initial measurement period
The final regulations also provide a transition rule for an employer’s first year as an applicable large employer, attorney Alden J. Bianchi of Mintz Levin wrote in a March 24 blog post.
With respect to an employee who was not offered coverage at any point in the prior calendar year, if an employer offers coverage on or before April 1 of the first year in which the employer is an applicable large employer, the employer will not be subject to a penalty (for January through March) for failing to offer coverage. If the coverage provided as of April 1 provides minimum value, the employer will also not be subject to a second penalty incurred for failing to provide minimum value health care coverage, Bianchi writes.
However, if the employer does not offer coverage to the employee by April 1, the employer may be subject to a penalty for those initial calendar months in addition to any subsequent calendar months for which coverage is not offered.
And, he adds, if the employer offers coverage by April 1 but the coverage does not provide minimum value, the employer may be also be subject to a penalty for those initial calendar months, as well as any subsequent months for which coverage does not provide minimum value or is not affordable.
The transition rule applies only during the first year for which an employer is an applicable large employer, even if the employer later falls below the 50 employee threshold and then expands and again becomes an applicable large employer, Bianchi says.
