Safe Harbor for Shared Employer Responsibility Provisions

The IRS has issued guidance for safe harbor methods that employers may use (but are not required to use) to determine which employees are treated as full-time employees for purposes of the shared employer responsibility provisions of Patient Protection and Affordable Care Act (PPACA<).

The PPACA's employer shared responsibility provisions (also known as the "employer mandate") specify that an applicable large employer may be subject to a shared responsibility payment (also known as an "assessable payment") if any full-time employee is certified to receive an applicable premium tax credit or cost-sharing reduction payment. Generally, this may occur where either:

• The employer does not offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan; or
• The employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that either is unaffordable relative to an employee's household income or does not provide minimum value (that pays at least 60 percent of benefits).

For purposes of the employer shared responsibility payment, an applicable large employer is an employer that on average employed 50 or more full-time equivalent employees on business days during the preceding calendar year. A full-time employee is an employee who is employed on average at least 30 hours per week. The provisions generally apply to months beginning after December 31, 2013.
The IRS guidance is intended to encourage employers to continue providing and potentially to expand group health plan coverage for their employees by permitting employers to adopt reasonable procedures to determine which employees are full-time employees without becoming liable for a payment under PPACA<; to protect employees from unnecessary cost, confusion, and disruption of coverage; and to minimize administration burdens on the Affordable Insurance Exchanges.
Employers have the option to use a look-back measurement period of up to 12 months to determine whether new variable hour employees or seasonal employees are full-time employees, without being subject to an assessable payment for that period with respect to those employees. In addition, employers have the option to use specified administrative periods for ongoing employees and certain newly hired employees; and are allowed a transition for new employees from the determination method the employer chooses to use for them to the determination method the employer chooses to use for ongoing employees.
The IRS is currently considering other issues with respect to the identification of full-time employees under PPACA<. We will keep you informed as additional guidance is released. In the meantime, if you have any questions as you prepare to implement this and other requirements under PPACA<, please call our office for an appointment. We will be happy to assist you.