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The delay of Obamacare’s employer mandate and what it means for your company

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The U.S. Department of Treasury recently announced that it is delaying until 2015 the enforcement of the so-called “employer mandate” provisions in the Patient Protection and Affordable Care Act (the “ACA” or “Obamacare”), which were supposed to take effect in 2014.

Implementation of the entire ACA is not being delayed. The only provisions delayed are the ACA’s employer mandate provisions. The delay does not affect other provisions, such as the “individual mandate,” the ability of eligible individuals to obtain subsidized health insurance coverage, or the ability of individuals and small employers (fewer than 50 employees) to obtain health insurance through the exchanges, such as Covered California. It also does not affect employers’ obligations to provide their employees with written notice regarding the existence of exchanges and availability of government health insurance subsidies by Oct. 1, 2013.

When they eventually take effect, the delayed employer mandate provisions will require large employers to either “pay” a penalty (a “shared-responsibility payment”) or “play” by offering a health care plan to all full-time employees and their dependents that: (1) provides minimum value; and (2) is affordable. In connection with this pay-or-play mandate, employers will also be required to report to the IRS information relating to their employer-sponsored health insurance plans.

Many details related to the employer mandate were left up to future regulations, which the Department of Treasury and the Internal Revenue Service issued over the past few years. Unfortunately, many saw these regulations as merely creating a legal and regulatory labyrinth for employers to navigate. Thus, it is not surprising that several businesses raised concerns about the complexity of the requirements and the need for more time to implement them. The one-year delay was the Department of Treasury’s temporary solution to these concerns. The official announcements by the Department of Treasury and the Internal Revenue Service regarding the enforcement delay can be found online at http://www.treasury.gov/connect/blog/Pages/Continuing-to-Implement-the-ACA-in-a-Careful-Thoughtful-Manner-.aspx and http://www.irs.gov/pub/irs-drop/n-13-45.PDF.

Although enforcement of the provisions has been delayed by a year, employers should still act now to prepare for 2015. The ACA’s employer mandate provisions are complex and employers face significant penalties for noncompliance. In this respect, when implemented, the penalties for not providing the requisite coverage to full-time employees will be significant, ranging from $167.77 to $250 per full-time employee, per month. Moreover, many of the employer mandate provisions, including those relating to the calculation of an employer’s size and the determination of an employee’s full-time status, are determined by looking at the employer’s behavior during the prior year. Thus, an employer’s behavior in 2014 will almost certainly have an effect on its obligations under the ACA in 2015. Accordingly, employers should immediately begin taking steps to plan their strategy for complying with the ACA. This process should include evaluating any current employer-sponsored health care plan to determine what, if anything, the employer needs to change to comply with the ACA, and how much it will cost to make those changes. Contact your legal counsel or insurance representative to begin planning now.

CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you this article is not intended or written to be used, and may not be used, for purposes of (i) avoiding penalties imposed under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matter.

- Submitted by Marks, Finch, Thornton & Baird LLP.

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