Thumb payorplay signEmployers with 100 or more full-time equivalents and a non-calendar plan year for a group health plan that will be subject to the shared responsibility rules in 2015 do not have to comply until the beginning of the group health plan’s 2015 plan year, so long as certain criteria are met. Same goes for employers with 50 or more full-time equivalents and a non-calendar plan year in 2016. Employers unable to meet the following criteria will be subject to the shared responsibility rules effective January 1, 2015 (or January 1, 2016 for employers with 50-99 full-time equivalents), regardless of the plan year.

1. Must Be a Group Health Plan

Based on my reading of the preamble to the proposed employer shared responsibility regulations, the preamble to the final employer shared responsibility regulations and the general statutory scheme of the ACA, I believe the type of plan this transition relief refers to is a group health plan, as defined by the Internal Revenue Code. Generally, a plan is a group health plan if it provides health care and is maintained by an employer. "Group health plan" excludes, though, HIPAA excepted benefits like limited-scope vision, limited-scope dental and work-site products like accident and hospital indemnity policies. This is important because, if the non-calendar year or fiscal year plan you want to rely on in delaying compliance with the ACA pay-or-play regulations is an excepted benefit or simply not a group health plan, it is very likely you cannot take advantage of the non-calendar year transition relief.

2. No Change in Plan Year since December 2012

To qualify for this transition relief, the employer must not have modified the plan year since December 27, 2012. This rule applies only if the employer modified the plan year to a later month in the year. If the employer made a change to an earlier month, they would still qualify for the transition relief, assuming all the other conditions are met.

3. Meet One of Three Tests of Existing Coverage

An employer with a non-calendar year group health plan must also meet one of three different tests of its existing coverage in order to qualify for the non-calendar year transition relief. The main idea is this: if the medical plan you currently have is offered only to a small group of employees (e.g., a management carve-out), you very likely will not be able to take advantage of the non-calendar year transition relief, and you will likely have to offer minimum essential coverage to all employees deemed full-time under the ACA by January 1, 2015 (or January 1, 2016, if you have between 50 and 99 full-time equivalents).

Pre-2015 Eligibility Test

Caution: if this test is met, the non-calendar year transition relief only applies to the employees meeting the test; it does not apply to the employer, generally. It appears this test is meant for employers that already provide major medical coverage to 70% or more of their employees, but that may offer unaffordable coverage to some employees or a plan that does not technically provide minimum value.

First, exclude from the test any employee eligible for a group health plan that has a calendar plan year. (Those calendar year plans will have to comply starting January 1.)

Second, remove from the testing population any employee who would not have been eligible for the non-calendar year group health plan under the eligibility terms as they existed on February 9, 2014 (assuming the employee had been hired before then). Remember, this test is for relief from affordability and minimum value, not coverage. If coverage is the problem, use one of the other two tests.

Third, if the employees remaining in the testing population are affordable coverage that provides minimum value no later than the first day of the 2015 plan year, no pay-or-play penalty will be due with respect to those employees for the period prior to the first day of the 2015 plan year.

Full-Time Employee Significant Percentage Test

The plan either (a) actually covered at least 33.33% of all full-time employees as of any date in the 12 months prior to and including February 9, 2014, or (b) offered coverage to 50% or more of all full-time employees. For employers with multiple group health plans, plans with the same non-calendar plan year can be grouped together. If all employees deemed full-time under the ACA are offered affordable, minimum-value coverage by the first day of the 2015 plan year (or 2016 if 50 to 99 full-time equivalents), then no pay-or-play penalty will be due for employees offered such coverage for the period prior to the first day of the applicable plan year.

All Employee Significant Percentage Test

The plan either (a) actually covered at least 25% of all employees (including part-time employees) as of any date in the 12 months prior to and including February 9, 2014, or (b) offered coverage to 33.33% or more of all employees (including part-time employees) during the open enrollment period that ended most recently before February 9, 2014. For employers with multiple group health plans, plans with the same non-calendar plan year can be grouped together. If all employees deemed full-time under the ACA are offered affordable, minimum-value coverage by the first day of the 2015 plan year (or 2016 if 50 to 99 full-time equivalents), then no pay-or-play penalty will be due for employees offered such coverage for the period prior to the first day of the applicable plan year.

 

Clear as mud, right? We understand. Fire off a question if you need help applying the transition relief.