United Benefit Advisors Insight and Analysis Blog

Mid-Size Employers and Transition Relief: How to Delay Offering Health Benefits until January 2016

By Danielle Capilla, Senior VP of Compliance and Operations, United Benefit Advisors
  Jul 2, 2015 12:00:00 PM

Application for health benefitsThe employer shared responsibility (i.e., "play or pay") requirements went into effect in 2015 for large employers only (those with 100 or more full-time or full-time-equivalent employees). Even though they generally will not be liable for penalties until 2016, mid-size employers (employers with 50 to 99 full-time or full-time-equivalent employees) will need to report on the coverage they offered for 2015, so long as they meet the maintenance requirements for transition relief. To avoid penalties – beginning in 2015 for large employers, and in 2016 for eligible mid-size employers – employers must offer health benefits to employees who work an average of 30 or more hours per week, or 130 hours per month.

If a large employer has a non-calendar-year plan and can meet certain transitional rules, it can delay offering health benefits until the start date of its 2015 plan year. Similarly, a mid-size employer with non-calendar-year plans that meets the same rules can delay offering benefits until the start of its 2016 plan year. An unrelated set of transitional rules related to community rating under the Patient Protection and Affordable Care Act (ACA) has created questions regarding the total effect when a plan year changes its effective dates.

Mid-size employer transition relief (maintenance requirements)

For a mid-size employer to qualify for transitional relief (i.e., delay offering health benefits until January 2016), it must meet a set of maintenance requirements. The maintenance requirements are that the employer be able to certify (on IRS reporting form 1094-C) that during the period beginning on February 9, 2014, and ending on the last day of the plan year that begins in 2015, the employer:

  • Has not reduced the size of its workforce or the overall hours of service of its employees so that it could qualify for this delay, and
  • Has not eliminated or materially reduced any coverage it had in effect on February 9, 2014.

A material reduction means that:

  • The employer's contribution is either less than 95 percent of the dollar amount of its contribution for single-only coverage on February 9, 2014, or is a smaller percentage than the employer was paying on February 9, 2014;
  • A change was made to the benefits in place on February 9, 2014, that caused the plan to fall below minimum value; or
  • The class of employees or dependents eligible for coverage on February 9, 2014, has been reduced.

Employers with 50 to 99 employees that are newly offering coverage to some employees, or that only offer coverage to a few employees, are eligible for the delayed effective date as long as they don't make changes that would violate the maintenance requirements. Employers with 50 to 99 employees that have not previously offered any coverage have until January 1, 2016, to offer coverage without risking penalties.

An employer with 50 to 99 employees and a calendar year plan that does not meet the maintenance requirements will be subject to the play or pay requirements, and penalties, as of January 1, 2015.

For the non-calendar year transition relief requirements, transitional rules related to community rating, and what happens when transition relief policies clash, request UBA’s ACA Advisor, “Mid-Size Employers; Transition Relief and Community Rating.”

Topics: PPACA Affordable Care Act, health benefits, Play or Pay, United Benefit Adivsors, Danielle Capilla, employer-shared responsibility reporting, transition relief