Washington Report: Government Releases Proposed Rules on Employer Mandate

The proposed rules address some key issues relating to the employer mandate provision of the health-care law.

January 03, 2013

WASHINGTON - Employers now have less than one year to comply with the employer mandate provision of the comprehensive health-care reform statute Congress passed in 2010. Come January 1, 2014, the Wall Street Journal writes that new regulations will bring "significant change for many smaller companies above the 50-worker threshold, and those in industries such as retail and restaurants that have lots of lower-income and part-time workers."

The newspaper continues: "Some offer no health benefits today, or limited coverage that won't meet the law's standards. Upgrading to richer plans could raise costs substantially; failing to do so could trigger the penalties, which can amount to $2,000 or $3,000 for each uncovered worker, depending on the circumstances, with the first 30 employees exempted from the count."

On December 28th, the Department of the Treasury and the IRS released the long awaited proposed rules to implement the employer mandate requirements. Beginning January 1, 2014, the IRS notes on its website that if large employers do not offer affordable health plans that provide a minimum level of coverage to their full-time employees, they may be subject to a penalty if at least one of their full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges.

To be subject to these provisions, an employer must have at least 50 full-time employees or a combination of full-time and part-time employees that is equivalent to at least 50 full-time employees (for example, 100 half-time employees equals 50 full-time employees). Under the law, a "full-time employee" works an average of at least 30 hours per week (so half-time would be 15 hours per week).

One of the more notable issues addressed in the proposed rules is how the employer mandate penalty is calculated by establishing a bright line test: If an employer offers coverage to at least 95% of its eligible full-time employees, it will only be subject to the $3,000 per year mandate penalty for each employee that is not offered "affordable" coverage and receives a premium credit when enrolling in an exchange provided plan. If an employer does not make an offer of coverage to at least 95% of its eligible full-time employees, then it will be subject to a $2,000 per year penalty multiplied by all of its employees (less the 30 employee statutory exemption) regardless of whether any of those employees are eligible for employer-provided coverage.

While stringent, this proposal is in some ways better than what many employers feared, because it does not penalize large employers that intend to offer coverage to all of their full-time employees but fail to offer coverage to a few full-time employees. Without the 95% provision noted above, employers could be severely penalized on account of simple administrative errors. At the same time, employers were hopeful the rule would only penalize employers based on the number of employees who were not offered coverage, rather than the total number of employees, but that is not the case.

The Department of Treasury and the IRS are accepting comments on the proposed rules until March 18, 2013. As a member of the Steering Committee for the Employers for Flexibility in Healthcare Coalition, NACS will be working with other groups representing employers with large amounts of temporary, part-time, and seasonal employees to craft comments ensuring the administration accounts for the convenience store industry??s unique characteristics as it drafts a final rule.

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