Several years ago, I went to the doctor for a sinus infection. While waiting for the doctor to return with a prescription, I happened to look over and notice that every jar, pen, notepad, etc. on the counter had the name of a recently released brand na…
Where do you want to eat? It’s a question heard every day and Employee Benefit News featured an article that stated, according to TIAA-CREF’s annual IRA survey, adults in the U.S. spend more time choosing a restaurant for a special occasion than they d…
Most employee benefit plans are required to file a Form 5500 annually, and penalties for not meeting this obligation can be costly. Tuesday, May 13, 2014 – 2:00 p.m. ET / 11:00 a.m. PT
Most employee benefit plans are required to file a Form 5500 annually, and penalties for not meeting this obligation can be costly. Tuesday, May 13, 2014 – 2:00 p.m. ET / 11:00 a.m. PT
According to the Centers for Disease Control and Prevention (CDC), an estimated 1 in 10 U.S. adults report symptoms of depression. In an Employee Benefit News article, it claims that while navigating employee mental health can be tricky for HR since no…
On February 10, 2014, the IRS issued final regulations on the employer shared responsibility requirements, often known as “play or pay.” The play or pay requirements originally were to take effect in 2014, but on July 2, 2013, the White House announced that compliance would be delayed until 2015.
These requirements apply to “applicable large employers,” which the law defines as an employer that has 50 or more full-time or full-time equivalent employees within its controlled group. However, the final regulations provide a transitional rule that will give many employers an additional year before they need to comply. While employers with 100 or more full-time or full-time equivalent employees will still need to meet the play or pay requirements in 2015, those with 50 to 99 full-time or full-time equivalent employees do not have to comply until 2016 if they meet certain requirements. For these mid-size employees to be eligible for the delay, the employer will have to certify that:
This certification will be part of the reporting form that all applicable large employers will need to file early in 2016.
The delayed play or pay compliance date does not affect the effective date of the other changes that apply in 2014 – most employers still must implement the 90-day maximum for waiting periods, discontinue pre-existing condition limitations, remove annual dollar maximums, and apply cost-sharing (out-of-pocket) limits. Small insured groups still need to offer the 10 essential health benefits at the metal levels (i.e., platinum, gold, silver, and bronze) and use community ratings starting in 2014.
Large Employer Responsibilities and Potential Penalties
If an employer is large enough for the play or pay requirements to apply, two separate requirements, and potential penalties, apply.
The first requirement is that the large employer offer “minimum essential” (basic medical) coverage to most of its employees. For 2015, “most” means 70%. For 2016 and later, “most” means 95%. If the employer does not meet this requirement, it will owe $2,000 per full-time employee, even on employees who are offered coverage. However, for 2015 the first 80 employees are excluded from this calculation. Beginning in 2016, the first 30 employees are excluded.
Beginning in 2016, the requirement to offer minimum essential coverage includes dependent children (up to age 26). An employer that offered coverage for dependent children in 2013 or 2014 is expected to maintain that eligibility. Coverage does not have to be offered to stepchildren, foster children, or spouses to meet play or pay requirements. However, employers will still need to offer coverage to stepchildren and foster children to meet the requirement to offer coverage to dependents to age 26.
The second requirement is that the large employer offer coverage that is both “affordable” and “minimum value” to its full-time (30 or more hours per week) employees or pay a penalty of $3,000 per year for each full-time employee who receives a premium tax credit/subsidy. Therefore, an employer that provides minimum essential coverage to most of its employees and avoids the $2,000 per employee penalty still will have to pay the $3,000 penalty on an employee who is either in the group that is not offered coverage or who is offered coverage that is not both affordable and minimum value if the employee receives a premium tax credit.
Note that these penalties are indexed, so the actual penalties will increase each year based on cost-of-living adjustments. This adjustment may occur as early as 2015.
Coverage is considered affordable for purposes of the play or pay requirement if the cost of single coverage for the least expensive plan option that provides minimum value does not exceed 9.5% of the employee’s safe harbor income or Federal Poverty Level (FPL). The cost of single coverage is always the measure of affordability, even if the employee has family coverage. An employer may use any of three safe harbors when measuring the employee’s income:
Coverage is considered minimum value if the actuarial value of the coverage is at least 60%.
Additional information is available through a Treasury Department fact sheet and an IRS Questions and Answers sheet.
For more help making your “Play or Pay” decision, Download UBA’s “Employer’s Guide to ‘Play or Pay'”.
04.27.2014
