Treasury and IRS Issue Final Employer Mandate Rules for the Affordable Care Act


Treasury and IRS Issue Final Employer Mandate Rules for the Affordable Care Act

Feb 13, 2014

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On February 10, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (“IRS”) issued final regulations for implementing the employer shared responsibility provisions of the Affordable Care Act (“ACA”) that take effect in 2015. Under the ACA, if a non-exempt employer elects not to offer qualified group health insurance to at least 95% of its full-time employees, it will risk being assessed a significant “employer shared responsibility” payment. The new rules consist of more than 200 pages of complex regulations released on Monday. Notably, the myriad regulations provide additional guidance and a safe harbor for calculating adjunct faculty hours for ACA purposes, address the status of student workers and seasonal employees with respect to health care coverage requirements, and provide transition relief rules for 2015 on the percent of full-time employees who must be offered health insurance to avoid the employer assessable payment penalty.

Adjunct Faculty

Adjunct faculty are generally compensated based on the number of credit hours they teach, rather than the number of hours worked. This has caused confusion and difficulty in determining whether adjunct faculty are full-time for ACA purposes. The ACA defines a full-time employee as an individual working an average of 30 hours or more per week. The final regulations provide a safe harbor method for calculating adjunct hours. The stated method provides that adjunct faculty be credited with 2.25 hours of service for each hour of classroom time (representing a combination of teaching or classroom time and time performing related tasks such as class preparation and grading of examinations or papers). This represents an additional 1.25 hours credited for non-classroom teaching duties for each 1.0 hour of classroom instruction. In addition to the service time to class time ratio, adjuncts would be credited for each additional hour they spend outside of the classroom on duties they are required to perform, such as holding office hours or required attendance at faculty meetings. The regulations state that this is not the only permissible method to calculate adjunct hours, but that using this method will provide a safe harbor at least through 2015.

Student Workers and Seasonal Employees

For colleges, students providing services under state or federally sponsored work-study programs will not have those hours counted in determining whether they are full-time employees under the ACA. However, other students who are employed at the college will have their work hours count toward full-time status under the ACA. That is, if they work at least 30 hours per week on average, they will be considered full-time and the college will be required to offer them health insurance under the employer mandate. Further, the final regulations now clarify that a “seasonal worker” working in an assigned position for six months or less during the year generally will not be considered full-time employees under the ACA.

Transition Relief for Employers for 2015

Under the ACA as written, all employers with at least 50 full-time equivalent employees are required to offer health insurance to at least 95% of their full-time employees to avoid a shared responsibility assessable payment. The final regulations provide transition relief for 2015 only, such that employers subject to the mandate will be required to offer health coverage to at least 70% of their full-time employees. The 95% requirement is now delayed and will become effective in 2016. In addition, for 2015 only, employers with 100 or more full-time equivalent employees will be subject to the employer shared responsibility mandate and related penalties, rather than the 50 full-time equivalent threshold, which will become effective in 2016.

If you have any questions regarding the implementation of the ACA please contact any Robbins Schwartz attorney.

Nanci N. Rogers, partner, and Joe Keavy, a law clerk in the firm’s Chicago office, prepared this Law Alert.