ACA Pay-or-Play Mandate Eased for 2015

Written by Eva A. Rasmussen

The IRS has issued final regulations on the Pay-or-Play Mandate, which requires certain employers to offer affordable health care coverage with minimum value to their employees or pay a penalty. The regulations impose obligations on employers with 50 or more employees. Employers with less than 50 full-time employees are exempt from the requirements of the Pay-or-Play Mandate.

The final regulations provide sufficient information for employers to develop a compliance strategy for 2015. Clifton Budd & DeMaria has prepared a White Paper, available upon request, describing the final regulations, including determining which employers are subject to the Pay-or-Play Mandate and which employees should be offered coverage to avoid penalties.

A summary of the regulations follows.

I. Pay-or-Play Mandate

Under the final regulations:

(a) Employers with 50–99 Full-Time Employees

  • These mid-sized employers will not have to comply with the Pay-or-Play Mandate until the first day of the plan year beginning in 2016 provided they provide appropriate certifications. The employer must certify that it has not (i) reduced the size of its workforce from February 9, 2014–December 31, 2014 to less than 100 employees merely to qualify for this transition relief and (ii) eliminated or materially reduced the health coverage it offered on February 9, 2014 before the last day of the 2015 plan year. A reduction in force for another purpose will not disqualify the employer from this transition relief.

(b) Employers with at Least 100 Full-Time Employees

  • A large employer must still comply with the Pay-or-Play Mandate commencing with the 2015 plan year. In order to avoid a penalty for not providing coverage to “substantially all” of its employees, the proposed regulations required a large employer to offer coverage to at least 95% of its full-time employees. The transitional rules reduce this requirement to 70% for the 2015 plan year although it will increase to 95% for 2016 and later plan years.

(c) Employers with Less Than 50 Full-Time Employees

  • Pursuant to the Affordable Care Act (“ACA”), employees with less than 50 full-time employees are exempt from the Pay-or-Play Mandate.

In all cases, in determining the number of full-time employees, part-time employees are aggregated to determine the number of full-time equivalent employees.

II. Dependent Coverage

In order to avoid a penalty, coverage must be offered to dependents as well as full-time employees. “Dependents” are defined as children, including adopted children but excluding step-children and foster children. Spouses are not considered dependents. If an employer does not currently offer dependent coverage or only offers it to some employees, the requirement to cover dependents will not apply until the 2016 plan year as long as the employer is taking steps to provide coverage starting with the 2016 plan year.

III. Additional Transitional Relief

The final regulations include transitional relief that is designed to make compliance easier for 2015:

(a) Six-Month Measurement Period

  • In determining if a variable hour or part-time employee is a full-time employee for coverage in 2015, an employer may use a six month measurement period during 2014 even if the related stability period (the period after the measurement period during which a variable employee must be offered coverage) is 12 months. After 2015, the stability period may not exceed the measurement period. A six-month period during 2014 may also be used to determine if an employer is considered to have 50 (or 100) employees in 2015.

(b) Fiscal Year Plan

  • Employers with a significant percentage of employees covered under (or offered coverage) under a plan with a fiscal (non-calendar) plan year must comply as of the first day of the 2015 plan year, (rather than as of January 1) provided they offer affordable coverage to at least 70% of its employees for the 2015 plan year.

If you would like a free copy of this firm’s White Paper, or have any questions about any aspect of the Affordable Care Act, please contact Eva Rasmussen ( or Richard Muser (, lead attorneys at CB&D’s Employee Benefits, Executive Compensation and ERISA Litigation Group.

About the Author
Eva A. Rasmussen
Benefits Counsel
Eva A. Rasmussen concentrates on the design, implementation and communication of qualified plans and deferred compensation arrangements as well as...
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