In December of 2012, the Internal Revenue Service (IRS) issued a set of proposed rules for the implementation of the Patient Protection and Affordable Care Act’s (ACA) Employer Mandate. As you know, the Employer Mandate requires a club with an average of 50 full-time employees during the previous calendar year to offer affordable health insurance to its full-time employees and their dependents. Failure to offer that insurance may result in a fine. The fines range from $3,000 per individual full-timer to $2,000 multiplied by all of a club’s full-time employees (less the first 30). Any fine will be paid to the IRS.
The proposed rules outlined how club leaders would deal with the most complex (and potentially expensive) aspect of the law. Over the next 13 months, the IRS collected comments from trade associations like NCA regarding how these proposed rules would affect their members. After reviewing those comments and making appropriate changes, the IRS released the final regulations for the Employer Mandate on February 10, 2014.
This article will highlight some of the most important aspects of the final rules, but club leaders are advised that this review of the rules will only scratch the surface of the final regulations. Before determining that a club has complied with these rules, club leaders should review their decisions with legal counsel. Naturally, questions may also be directed to NCA and we strongly urge our members to participate in our weekly Health Care Town Hall meetings and to use our dedicated Health Care website for further information on the Employer Mandate and the rest of the ACA.
Phase-In of the Employer Mandate
When the IRS finalized these new rules, it wanted to provide businesses with a way to ease into the full requirements of the law. To that end, the regulations provide a new delay to the Employer Mandate.
For clubs with less than 100 full-time employees/full-time equivalents, they will not be required to comply with the Employer Mandate until 2016. In the summer of 2013, the Employer Mandate was delayed for all clubs until 2015. These final regulations provide a further one-year delay for clubs with a limited number of employees.
While this is good news for many smaller clubs, there are some requirements that must be met for a club to take advantage of this additional one-year delay:
1. The club must employee less than 100 full-time employees/full-time equivalents in 2014;
2. From 2/9/14 – 12/31/14, the club may not reduce the size of its workforce or cut hours of its employees to meet the less than 100 threshold (bona fide business reasons for changes are permitted);
3. The club may not eliminate or materially reduce the insurance it offered as of 2/9/14; and,
4. The club may not change its plan’s start date after 2/9/14.
Should a smaller club meet these requirements and certify the same to the IRS, it may have another one-year respite from the Employer Mandate.
In addition to this benefit for smaller clubs, the IRS also provided a new benefit for those clubs that have 100 or more full-time employees/full-time equivalents. Under the final regulations, such clubs may offer health insurance to only 70 percent of their full-time employees in 2015 rather than all of them.
This relief was provided by the IRS as a way to “ease the transition to covering employees working 30 hours or more per week.” However, to receive this benefit these larger clubs may not change their plan’s start date after 2/9/14.
These two phase-in options for clubs are available only in 2015. Beginning in 2016, all clubs must offer insurance to all of their full-time employees.
Seasonal Employees
In the proposed rules, private clubs did not have to offer health insurance to their seasonal employees, even though those employees worked full-time. However, the actual definition of “seasonal employee” was left to be determined at a later date. Under the final rules, that definition was provided.
A seasonal employee is one who is hired into a position for which the customary annual period of employment is six months or less. Should an employee meet this definition, then the employee will not generally be considered full-time, which means the club will not have to offer him insurance.
The rationale behind this is based on the law’s intent to have employers offer insurance to full-time, year-round employees. Since seasonal employees are not employed year-round, they may be treated differently. Therefore, those seasonal employees may be placed in the look-back measurement period just as the club would do with variable hour employees.
For many clubs, this definition will satisfy the term of employment for their seasonal employees. Unfortunately, some clubs employ seasonal staff for longer than six months. Under these rules, those employees cannot be called “seasonal employees.” In that scenario, the club will determine if it is reasonably expected that this new hire will work full-time. Since most employees hired during the high season will be expected to work 30+ hours per week, then the club will need to offer insurance to those employees.
Though it is true these employees will not work for the club year-round, they will be working beyond the six-month cut-off time. Thus, they cannot be defined as seasonal employees and cannot be treated differently from other employees. With this as the new reality, clubs may need to reevaluate the hours and months these employees will work when compared to the cost of providing the employer’s contribution for an insurance policy.
When discussing “seasonal employees,” it must be reiterated that this definition only applies for purposes of determining full-time employee status and the offering of insurance. It does not apply to the definition of “seasonal workers” and the determination of whether the club falls under the law.
“Seasonal workers” are those staffers a club counts to determine if it has 50 or more full-time/full-time equivalents during the previous year. Seasonal workers on property for four months or less may be removed from that count. If a club does fall under the law, then the seasonal employee definition is used to determine whether that particular employee must be offered insurance.
Offering Insurance
In an effort to assist clubs that have non-calendar year health insurance plans, the final regulations allow clubs to offer insurance at their 2015 plan year start date, rather than 1/1/15. However, to take advantage of this, a club must show that it had a non-calendar year plan on 12/27/12 (when the proposed rules were first issued) and that since 12/27/12, the club did not change the plan year’s start date to a later date.
If a club meets these requirements, then it may offer a plan after the 1/1/15 date to those employees who previously were offered insurance in 2014. For employees who were not offered a plan in 2014 and who will be eligible to receive an offer of insurance in 2015, a club may offer them insurance at the start of the 2015 plan year if:
1. At least 25 percent of all of the club’s employees were covered at any time from 2/9/13 – 2/9/14; or at least 33 percent of all of its employees were offered insurance during the open enrollment before 2/9/14; OR
2. At least 33 percent of the club’s full-timers were covered at any time from 2/9/13 – 2/9/14; or at least 50 percent of its full-timers were offered insurance during the open enrollment before 2/9/14.
Finally, during the first year that a club finds that it falls under the ACA, it is entitled to offer insurance to those full-timers who did not receive an offer of insurance in the previous year by April 1 without incurring a penalty. This applies as a one-time benefit to assist clubs as they determine whether they fall under the law and to whom they must offer insurance. If a club were to have less than 50 full-timers the following year and more than 50 the next, this benefit will not apply again.
Conclusion
Thankfully, many aspects of the final Employer Mandate regulations remain the same as the proposed regulations. Therefore, clubs leaders should be well on their way to preparing for full implementation of the Employer Mandate in 2015.
To that end, clubs should be tracking their employees’ hours to see if they fall under the law and if they are entitled to the additional delays these final rules grant. In addition, clubs need to determine which of their employees will be placed in the look-back measurement period now for a stability period beginning in 2015. To accommodate a shorter measurement period than 12 months, these new rules allow clubs to have a six-month look-back period with an accompanying 12-month stability period.
Finally, clubs should now take a long look at their staffing needs, their employees’ hours and the needs of their members. And, of course, they should review the additional costs associated with the 2015 start date of the Employer Mandate (2016 start date for qualifying clubs).
As always, NCA is here to help if you have questions or concerns about the law. There is no doubt this law will fundamentally change the way you deal with your employees and your members for years to come. Whatever we can do to make that transition easier, we will.