Time is up

The ACA is in full effect with no remaining implementation postponements

The Patient Protection and Affordable Care Act, commonly referred to as the Affordable Care Act (ACA) or Obamacare, was enacted in March 2010 and has been implemented in phases during the past several years. Several ACA requirements governing health insurance policies were put into effect almost immediately. However, various regulations were enacted that postponed the mandate for employers with 50 to 99 full-time employees to provide health insurance to their employees until Jan. 1, 2016. The postponements have now ended.

Following is a summary of some of the requirements imposed on employers with 50 or more employees as of Jan. 1, 2016. If your company falls within this category of employers, you need to be aware of your responsibilities under the law.

Summary of requirements

Beginning this month, the employer mandate rules require employers who have 50 or more full-time equivalent employees (FTEs) to offer health insurance to these employees or potentially pay fines. The rules took effect Jan. 1, 2015, for employers with 100 or more FTEs. (See "How to calculate FTEs," for more information.)

For 2015, employers who qualified as being in the 50- to 99-FTE range (meaning they were exempt from the ACA rules) must file a certification with the Internal Revenue Service (IRS) to show they met the exemption requirements. The certification includes a statement that the employer did not reduce the size of its workforce or the overall hours of service of its employees just to fall within the scope of the exemption. The employer also must certify it did not eliminate or reduce previously offered health insurance coverage.

These certification requirements are contained in new IRS forms 1094-C and 1095-C. For 2015, the 1095-C form must be completed for each employee who was a full-time employee for any month in the calendar year, and it must be delivered to employees by Jan. 31 (on the same timetable as W-2 forms). This form essentially reports information used to determine number of employees, the insurance offered and the number of employees accepting the insurance. The 1094-C form is a transmittal form for the employer to send to the IRS along with copies of all the 1095-C forms and some information related to the insurance coverage offered. Both forms need to be filed with the IRS by Feb. 29 (March 31 if filing electronically).

Beginning this year, all applicable large employers must offer coverage to full-time employees and those employees' child dependents. If your company has 50 or more employees, you will need to offer health insurance coverage to employees working 30 or more hours per week on average starting no later than 90 days after they are hired. Hours worked during a month include all compensable hours, such as paid sick leave and paid vacation. Health insurance coverage does not have to be offered to part-time employees working fewer than 30 hours per week.

For ACA purposes, dependents for whom health insurance is to be provided are children under the age of 26. You are not obligated to offer insurance coverage for spouses. Although the statute requires large employers to provide health insurance for all full-time employees, the regulations provide employers who are subject to the mandate will not be penalized for failure to offer health care coverage in 2016 to 5 percent of their full-time employees or five employees, whichever is greater. Applicable large employers that do not comply are subject to penalties.

Who is a large employer?

Different rules apply to the calculation of the number of employees depending on the purpose. To determine whether an employer is a large employer, the rules require the calculation to include the number of FTEs. Once an employer is determined to be large, a slightly different set of rules applies to determine which employees will be treated as full-time employees requiring coverage.

To calculate the number of employees, you must consider FTEs but also may use the seasonal worker exception if you employ seasonal workers.

Part-time employees are considered when determining the number of FTEs. Two part-time employees who each work 15 hours per week count as one FTE. If the number of employees varies during the year, you first must determine whether the 50 FTE threshold has been reached.

Another issue when calculating the number of employees is how to treat seasonal workers. If you hire seasonal workers and the total number of employees exceeds the threshold number of 50 for no more than 120 days, the seasonal workers can be excluded from the calculation of employees to determine whether you are a large employer.

The ACA provides that, for purposes of the large employer calculation, the rules adopted by the Department of Labor (DOL) will apply. Under those rules, a seasonal worker is defined as a worker who performs labor or services on a seasonal basis, which is work that ordinarily is performed at certain seasons or periods of the year and that, because of its nature, may not be continuous or carried throughout the year. The final regulations make it clear employers may apply a reasonable, good faith interpretation of the term "seasonal worker" and DOL rules.

However, note the regulations use two similar and confusing terms. When calculating the number of employees to decide whether an employer meets the definition of an applicable large employer, the seasonal worker exception may apply. But when determining which employees must be offered insurance by an applicable large employer, the regulations provide specific rules pertaining to "seasonal employees" and, of course, this term is defined differently than "seasonal worker." A discussion of how seasonal employees affect the determination of which employees must be offered insurance follows.

Time periods and transition rules

When making these calculations, you are required to look to an employee's status and time worked for the previous year. For employers with 100 or more FTEs who became subject to these rules Jan. 1, 2015, the IRS adopted a transition rule to give employers some relief. Rather than having to make the evaluation during the entire 12-month period of 2014, you could choose any consecutive six-month period during 2014 to measure the data for these calculations so a determination could be made in time to plan for Jan. 1. The same rule applies for employers who become subject to the mandate in 2016.

Controlled group rules

Determining whether you have 50 or more employees for ACA purposes will not be based solely on the legal structure of your company but also will take into account controlled group rules. These rules are used to determine whether there is sufficient common ownership or control of several companies such that they should be combined for purposes of the ACA and other regulations when calculating the number of employees.

If, for instance, an employer is the sole owner of several legally separate companies, which may not be related with regard to the nature of their activities, the employees of all the controlled groups will be aggregated for ACA purposes. Under the regulations, companies that have a common owner or are otherwise related generally will be combined for purposes of determining whether the employer has at least 50 FTEs.

Affiliated companies can be considered part of the same controlled group even if they operate in completely separate or unrelated fields. Any group of affiliated companies should be reviewed to see whether they fall within the controlled group rules.

Who gets insurance?

If your company is a large employer, it must provide insurance to all full-time employees. All newly hired employees whom you have the reasonable expectation of being full-time employees should be offered insurance coverage. With respect to current, ongoing employees, the ACA calls for employers to determine whether an employee is a full-time employee on a monthly basis throughout the year.

Recognizing that trying to make this determination would be a burden on employers, the regulations have adopted several safe harbors for employers to use when making these calculations rather than having to make the determination on a monthly basis throughout the year. Employers who are not sure which employees must be offered insurance can use these safe harbor rules on an ongoing basis.

Look-back periods

For purposes of ongoing compliance, the regulations permit employers to evaluate employee status using defined look-back periods. Three concepts apply here: the standard measurement period, standard stability period and administrative period.

The standard measurement period is the time during which an employer will evaluate how many employees worked 30 or more hours per week. The employer can choose the length of the measurement period, provided it is a consecutive time period between three and 12 months. For new variable-hour employees, the employer can evaluate an employee's status under a separate initial measurement period.

The standard stability period is the time during which insurance must be maintained for employees who are full-time during the standard measurement period. The standard stability period must be longer than six months or the same period as the standard measurement period, and it must begin immediately following the end of the standard measurement period or applicable administrative period.

During the administrative period, an employer can evaluate its data and determine which employees must be offered insurance. This period cannot be longer than 90 days and must begin immediately following the end of the standard measurement period.

For example, a large employer could elect to adopt a standard measurement period of 12 months that runs from Oct. 16 of one year through Oct. 15 of the following year. During this period, the employer will look to see which employees qualify as full-time for purposes of the insurance mandate. The employer then could adopt an administrative period that runs from Oct. 16 through Dec. 31 during which time the data will be brought together and the determinations will actually be made. Once these determinations are made, the employer must provide insurance for the employees identified for the entire stability period, which, in this case, would need to be 12 months beginning Jan. 1 following the end of the administrative period.

Employee categories

The regulations also provide an employer flexibility when choosing these periods provided the determination is made uniformly and consistently for all employees within the same category. For this purpose, the IRS has identified four permissible categories, including collectively bargained employees and noncollectively bargained employees, salaried employees, hourly employees and employees residing in different states.

Current, ongoing employees will be evaluated and compliance will be tested using the standard measurement, administrative and stability periods. Once an employee is determined to be full-time or part-time for the standard measurement period, the status will remain during the standard stability period. Consequently, an employee who is a full-time employee for the standard measurement period must be offered health insurance for the standard stability period even if that employee's status changes to part-time in the interim. However, for the subsequent year, the employee will be re-evaluated and if the same employee changes to a part-time employee for that period, the employer does not have to offer health insurance to the employee.

If a new employee is reasonably expected to be a full-time employee, the employer must offer insurance but will not incur a penalty if it does not provide insurance until after the employee has been employed three months. The final regulations include several factors to be used when determining whether a new employee will be full-time, including whether the employee being replaced was full-time; whether comparable employees are full-time; and whether the job was advertised or communicated as requiring 30 or more hours per week on average.

Variable-hour and seasonal employees

If an employer cannot reasonably determine whether a new employee will qualify as full-time or part-time, the employee will be evaluated using the variable-hour rules. These rules apply similar measurement and administrative periods except the measurement and administrative periods combined cannot extend beyond the end of the month beginning on the employee's one-year anniversary. For later years, the employer will use its standard measurement and administrative periods and evaluate the employee as an ongoing employee.

Seasonal employees are treated as variable hour employees to determine eligibility for coverage. For these purposes, a seasonal employee means an employee in a position for which the customary annual employment is six months or less. Although seasonal employees by definition work only part of the year, the employer will measure the hours of service completed by seasonal employees during the entire initial measurement period for purposes of determining whether they must be offered coverage.


Beginning this year, all employers with 50 or more FTEs are potentially subject to penalties if they do not offer any health insurance plan to employees or if they offer a plan that is classified as "unaffordable" or lacking "minimal value."

If a large employer does not offer health insurance and an employee obtains a tax credit to purchase insurance from an exchange, the employer is assessed $2,000 per year for each full-time employee, excluding the first 30 full-time employees.

Large employers who offer health insurance that is unaffordable or lacks minimum value are subject to an assessment of $3,000 per year for each full-time employee receiving federal financial assistance. This payment cannot exceed the assessment the business would pay if it did not offer health coverage.


Despite complaints about a lack of guidance in the regulations, union plans are subject to most of the same rules as open-shop employers, including rules regarding affordability, minimum value, calculation of FTEs, automatic enrollment of employees of large employers, and eligibility and waiting periods.

The final regulations provide that a large employer will be treated as having offered minimum essential coverage and will not be subject to a penalty with respect to a full-time employee if the employer is required to contribute to a multiemployer plan pursuant to a collective-bargaining agreement; coverage under the multiemployer plan is offered to the employee and his or her dependents; and coverage offered to the employee is affordable and provides minimum value.

As with open-shop plans, a multiemployer plan is not affordable if the cost to an employee exceeds 9.5 percent of household income, and the plan does not provide minimum value if the anticipated share of costs paid by the plan is less than 60 percent. Typical union-negotiated health care plans have actuarial values well in excess of 60 percent and are likely to satisfy the minimum value requirement. These rules can be relied upon until modified in the future, and the IRS has committed to providing at least six months' notice of any change in these rules.

Eligibility requirements are permitted as long as they are not designed to avoid compliance with the 90-day waiting period limitation. If a multiemployer plan operating pursuant to an arms-length collective-bargaining agreement has an eligibility provision that allows employees to become eligible for coverage by working hours of covered employment across multiple contributing employers (which often aggregates hours by calendar quarter and permits coverage to extend for the next full calendar quarter regardless of whether an employee has terminated employment), that provision should be considered as designed to accommodate a unique operating structure and, therefore, not designed to avoid compliance with the 90-day waiting period limitation.

With respect to the mandatory Notice of Exchange, which must be given to all new employees within 14 days of their start dates, a multiemployer plan, insurer or third-party administrator may send the notice on behalf of an employer, and an employer is deemed to have satisfied its obligation to provide the notice if another party provides timely and complete notice on its behalf. However, multiemployer plan trustees are not required to send the notice, and, therefore, union employers are advised to contact plan trustees to confirm which employees, if any, will receive notice from the plan.

Unions have argued the Obama administration should designate union plans as qualified health care plans so plan participants would be eligible for the tax credits the law provides to low- and moderate-income people buying insurance on the exchanges. The change would make union plans particularly attractive because employers and employees would benefit from tax breaks given to regular employer insurance and from government subsidies.

So far, there is no indication unions will be able to obtain this designation. To the contrary, the Obama administration has, in response to union concerns, noted multiemployer plans formed under the Taft-Hartley Act fail many tests the law sets up for insurance plans that receive subsidies. For example, they receive the tax break given to employer-based plans and often do not follow "guaranteed issue" rules, meaning they do not offer insurance to everyone who wants it, disqualifying them from the insurance marketplaces and associated subsidies.

Although some unions have mounted an aggressive effort to change the administration's mind, a Sept. 13, 2013, Department of the Treasury interpretation confirmed individuals covered by employer-sponsored plans, including multiemployer plans, are not eligible for premium tax credits and suggested there is no way for the administration to handle the unions' request administratively. Therefore, the change only could come about if Congress changes the rules to allow more money to subsidize union members. This appears to be an unlikely scenario—a change Republicans are likely to fight and one Democrats have not made a priority.

The administration has offered to work with unions to convert their plans into qualified insurance plans that follow the rules of the marketplaces so they can qualify for subsidies. Presumably, unions currently are doing their due diligence and investigating this alternative, but it would necessarily entail significant disruption for their members.

A new reality

With full implementation of the ACA's requirements upon us, you would be well-advised to seek guidance and assistance from qualified organizations to ensure compliance with the various technical rules and regulations. The penalties for failing to comply can be stiff, and the rules are fairly complicated. But compliance no longer is optional, and based on existing court cases and the political climate, the ACA is the new reality that should not be ignored.

Scott D. Calhoun is an attorney with Atlanta-based law firm Hendrick, Phillips, Salzman & Flatt.

How to calculate FTEs

To determine the number of full-time equivalent employees (FTEs) your company has, do the following:

  1. Count the number of full-time employees, including seasonal workers, who work an average of 30 hours per week or 130 hours per month.
  2. Add the number of hours worked by part-time employees and divide by 120.
  3. Add the numbers in steps 1 and 2 for each of the 12 months in the preceding calendar year, add the monthly totals and divide by 12.

If the average equals or exceeds 50, you will be subject to the ACA's employer mandate unless the seasonal worker exception applies. Note that this number only tells you whether your company has 50 or more FTEs; it does not tell which employees are to be offered health insurance coverage. You are not required to offer health insurance to part-time employees (those who work fewer than 30 hours per week).

NRCA offers A Roofing Contractor's Guide to the Affordable Care Act, a comprehensive guide to the ACA, and it is free for members. To access the guide, go to shop.nrca.net.


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