One of the many requirements of health care reform is the so-called employer mandate. The employer mandate generally provides that large employers who fail to offer their full-time employees affordable health coverage that provides minimum value may potentially face significant penalties. In January 2013, the IRS published proposed regulations on the employer mandate. The employer mandate was originally scheduled to become effective January 1, 2014, but the IRS postponed the mandate until January 1, 2015. Earlier this week, the IRS issued final regulations that provide welcome transition relief and clarify several open issues in the proposed regulations. This article summarizes many of the transition relief items addressed in the final regulations. Stay tuned for additional EmployNews articles on other items clarified in the final regulations. 
 
While employers are in full swing preparing for implementation of the employer mandate next year, the final regulations provide transition relief in some areas, including:
 
Employers with 50-99 Employees 
Generally, the employer mandate applies to employers with 50 or more full-time and full-time equivalent employees. The transition guidance provides that employers with between 50 and 99 full-time and full-time equivalent employees in 2014 are exempt from compliance until 2016. To qualify for this relief, employers generally may not reduce the size of their workforce or the overall hours of their employees unless done so for a bona fide business purpose. In addition, employers generally may not eliminate or materially reduce health coverage offered as of February 9, 2014 or otherwise alter the terms of their group health plans to narrow or reduce the class of employees to whom coverage was offered. Employers will be required to certify that they meet these eligibility requirements to qualify for this relief.
 
Employers with 100 or More Employees 
The proposed regulations provided that employers subject to the employer mandate must offer coverage to at least 95% of their full-time employees to avoid penalties. The final regulations issued this week ease this requirement for 2015 by requiring employers with 100 or more full-time or full-time equivalents to offer coverage to at least 70% of their full-time employees. In 2016 and thereafter, the percentage is increased back to 95%.
 
Non-Calendar Year Plans 
Employers that offer non-calendar year plans that begin in 2014 and run into 2015 have expressed concern as to when compliance with the employer mandate must begin. The final regulations confirm that employers with non-calendar year plans are not required to comply with the employer mandate until the beginning of the 2015 plan year (i.e., the plan year that begins in 2015) instead of January 1, 2015. To qualify for this relief, the employer must satisfy certain conditions.
 
Dependent Coverage 
The employer mandate requires employers to offer coverage to dependents, which generally means a child of an employee who has not attained age 26. To provide employers sufficient time to cover dependents, an employer will not be subject to employer mandate penalties solely on account of a failure to offer dependent coverage in 2015 if the employer takes steps during 2014 toward offering dependent coverage. This applies only to employers that do not offer dependent coverage, do not offer dependent coverage to all dependents, or offer dependent coverage that does not constitute minimum essential coverage. Note that employers that have offered dependent coverage during the 2013 and/or 2014 plan years and subsequently dropped or drop dependent coverage are not eligible for this relief.