Q: We have a medical insurance plan that renews July 1. Is it true that I don’t have to worry about the employer penalty until July, 2015?
A: The IRS granted employers a grace period from the employer mandate for plans in 2014 that were not on a calendar year. This grace period allows employers to comply if their plan(s) are compliant on renewal in 2014.
The “pay-or-play mandate” is not being enforced until January 1, 2015. The deadline was extended because reporting rules were not fully confirmed or in place.
On February 10, 2014, however, the IRS issued final regulations on the employer-shared responsibility, giving transitional relief to employers with less than 100 full-time equivalent employees (FTE). If you have less than 100 FTE in your workforce and you meet certain conditions—such as your school was under 100 FTE on February 9, 2014 and you didn’t reduce your workforce between February 9, 2014 and December 31, 2014—you won’t have to comply with the employer-shared responsibility until your insurance plan renews in 2016. Also, if you had a health insurance plan in place on February 9, 2014 and you didn’t eliminate or materially reduce your health insurance benefit, you meet requirements and won’t be penalized. You will have reporting requirements, but no penalty will be imposed for not offering coverage.
If you have more than 99 FTE, you must comply with the employer-shared responsibility when your plan year renews in 2015. You do have relief in that you only have to offer coverage to 70% of your FTE in 2015. That will increase to 95% in 2016.
Also, if you do not currently offer dependent coverage, you do not have to offer dependent coverage in 2015. However, you must show that you are taking steps to arrange for dependent coverage.
You will have to determine if your insurance coverage is affordable to your employees. Affordable coverage is the least expensive employee only coverage you offer that is not more than 9.5% of Modified Adjusted Gross Family Income (MAGI). The IRS will notify you if one of your employees goes to the exchange this year for a tax credit. They will want to know if the employee is eligible for coverage under your school’s policy.
This leaves the question of how you can determine the MAGI of your faculty and staff. The IRS understands that the employer cannot determine family income, so they give you three safe harbors.
1.) The single-only coverage is not more than 9.5% of W-2 income.
2.) Rate of pay—comparing the monthly pay amount to the monthly cost of employee-only coverage.
3.) The Federal Poverty Rate. If the employee-only health insurance does not exceed 9.5% of the federal poverty line, it is considered affordable. You would use the Federal Poverty Rate for the date of renewal divided by 12.
As you are working on your budget, you should be thinking about the Health Care Reform and how it affects your budget for the coming years. If you are between 50 and 99 employees, you have an additional year to become compliant.
Curious about your school's health care policies and the reform's changes? Ask ISM’s Health Care Reform Expert a question. We respect your privacy. You can also view ISM’s health care solutions.
