• Affordable Care Act Update: Pay-or-Play Regulations
  • January 28, 2013 | Author: Steven R. Gerlach
  • Law Firm: Bernstein Shur - Portland Office
  • On December 28, 2012, the IRS issued a set of proposed regulations and Q-and-As providing further guidance on the Affordable Care Act’s pay-or-play rules. This is the first of three updates discussing the proposed regulations; today we focus on the determination of whether an employer is an “applicable large employer,” and thus required to participate in pay-or-play.

    Under the ACA, an applicable large employer is defined as an employer that has at least 50 full-time employees. For these purposes, full-time is defined as 30 hours per week; part-time employees are counted proportionally. In counting full-time employees, certain seasonal employees may be excluded if they are part of the employer’s workforce 120 days or fewer in a calendar year.

    The new regulations clarify or provide relief regarding several aspects of these rules:

    • To be subject to the pay-or-play rules, an employer must employ at least 50 full-time employees or a combination of full-time and part-time employees that equals at least 50
    • Employers that are close to hitting the 50-employee threshold may qualify for special transition relief to help them count employees in 2013
    • All employees of a controlled group of companies or an affiliated service group are counted in determining applicable large employer status
    • In determining applicable large employer status, predecessor employers and successor employers are generally taken into account
    • New employers are applicable large employers if they reasonably expect to employ an average of 50 full-time employees (taking into account part-time employees) during the year
    • For the purposes of the seasonal employee exception an employer may apply a period of either 120 days or four months
    • Part-time employees are counted proportionally according to a multi-step FTE formula provided in the regulations

    To help employers with ACA compliance, Bernstein Shur has assembled an ACA Team — a multi-specialty group of attorneys from employment law, litigation, business law and ERISA. The ACA Team is available for flat-fee, full compliance audits, and half-day and full-day workshops.