Employer Shared Responsibility Provision: Transition Relief for 2015 Plan Years

Basic Information

• This page contains information about transition relief and interim guidance related to the employer shared responsibility provisions.

• Under section 4980H(a) of the employer shared responsibility provisions, a liability may exist if an applicable large employer (ALE) does not offer affordable minimum essential coverage to at least 95 percent (70 percent for 2015) of full-time employees (and their dependents) and at least one full-time employee receives the premium tax credit (PTC) for coverage purchased through the Health Insurance Marketplace.
   

• Under section 4980H(b) of the employer shared responsibility provisions, a liability may exist if an ALE does offer coverage to at least 95 percent (70 percent for 2015) of its full-time employees (and their dependents) but at least one full-time employee receives the PTC for coverage purchased through the Marketplace because coverage was not offered to that particular full-time employee was not affordable or did not provide minimum value. 
   
• Several forms of transition relief under the employer shared responsibility provisions were available for calendar year 2015. Because employers generally offer coverage for a 12-month plan year and some plan years are different than the calendar year, certain forms of transition relief are available to plan years that began in calendar year 2015 and end in calendar year 2016 (the 2015 plan year). Limited transition relief for 2016 is available only to employer coverage with a plan year that is different than the calendar year and that has calendar months in the 2015 plan year that fall within 2016, and otherwise meets the requirements for the applicable transition relief.

Transition Relief for 2015 Plan Years

There are eight forms of transition relief for 2015 that apply to various aspects of the employer shared responsibility provisions.  Each form of relief is described briefly below, but is further described in section XV.D of the preamble to the employer shared responsibility regulations.

1. ALEs with at Least 50 but Fewer than 100 Full-time Employees (Including Full-time Equivalent Employees) on business days during 2014

An ALE with at least 50 but fewer than 100 full-time employees (including full-time-equivalent employees) on business days during 2014 will not be subject to the employer shared responsibility provisions in 2015 (and, in addition, for an employer with a non-calendar year plan year, for the months in 2016 that are part of the 2015 plan year), provided certain conditions are met regarding the employer’s maintenance of workforce and pre-existing health coverage.  For more information on this relief, see section XV.D.6 of the preamble to the employer shared responsibility provision regulations.  Even if an employer is eligible for this relief, the employer is still required to complete the related information reporting for 2015.    

2. Shorter Period Permitted for Determining ALE Status for 2015

Rather than being required to measure its ALE status based on the number of full-time employees (including full-time equivalent employees) for all twelve months of 2014, an employer may instead base its ALE status on any consecutive six-month period – as chosen by the employer – during 2014. For more information on this relief, see section XV.D.3 of the preamble to the employer shared responsibility provision regulations.

3. Certain Non-Calendar Year Plans

Transition relief is available for certain employers sponsoring non-calendar year plans for the months in 2015 prior to the beginning of the 2015 plan year with respect to certain employees, if the employer and plan meet various conditions.  For more information on this relief, see section XV.D.1 of the preamble to the employer shared responsibility provision regulations. 

4. Offers of Minimum Essential Coverage for Pay Periods in January 2015.

Generally, if an ALE (or ALE Member, if part of an Aggregated ALE Group) employer fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not having been offered coverage during the entire month.  Under this relief, however, if an ALE offered coverage to a full-time employee no later than the first day of the first payroll period that began in January 2015, the employee will be treated as having been offered coverage for January 2015. For more information on this relief, see section XV.D.4 of the preamble to the employer shared responsibility provision regulations. 

5. Offers of Minimum Essential Coverage to Dependents

In general, an ALE (or ALE Member, if part of an Aggregated ALE Group) may treat an offer of coverage to a  full-time employee but not his or her dependents as an offer of coverage to both the full-time employee and his or her dependents, but only if certain requirements are met.  Specifically, this transition relief applies only if an employee was not offered dependent coverage during the plan year beginning in 2013 or 2014 and the ALE (or ALE Member) took steps during the 2014 or 2015 plan year (or both) to extend coverage under the plan to dependents not offered coverage during the 2013 or 2014 plan years (or both).  For more information on this relief, see section XV.D.5 of the preamble to the employer shared responsibility provision regulations. 

6. Offers of Minimum Essential Coverage to at Least 70 Percent of Full-Time Employees (and Their Dependents)

One of the two employer shared responsibility payments relates to whether an employer offered minimum essential coverage to at least 95 percent of its full-time employees (and their dependents).  For 2015 (and, in addition, for an ALE with a non-calendar year plan year, for the months in 2016 that are part of the 2015 plan year), 70 percent is substituted for 95 percent.  However, even if an ALE offers coverage to at least 70 percent of its full-time employees (and their dependents) for 2015, it may still be subject to an employer shared responsibility payment under IRC section 4980H(b)  if a full-time employee receives the premium tax credit for coverage purchased through the Marketplace.  For more information about this relief, see section XV.D.7.a of the preamble to the employer shared responsibility provision regulations.

7. Shorter Measurement Periods Permitted for Identifying Full-Time Employees

Under the look-back measurement method for determining full-time employee status, in general, the length of the measurement period and stability period will be the same. However, for stability periods beginning in 2015, an employer may adopt a transition measurement period that is shorter than 12 consecutive months, but that is no less than six consecutive months, under certain conditions.  This transition measurement period can begin no later than July 1, 2014 and end no earlier than 90 days before the first day of the 2015 plan year.  For more information on this relief, see section XV.D.2 in the preamble of the employer shared responsibility provision regulations. 

8. Calculation of Employer Shared Responsibility Payment for ALEs With at Least 100 Full-time Employees (Including Full-Time Equivalent Employees)

In general, if an ALE member is subject to the employer shared responsibility payment because it doesn’t offer minimum essential coverage to its full-time employees (and their dependents), the annual payment is $2,000 for each full-time employee (adjusted for inflation), after excluding the first 30 full-time employees from the calculation.  For 2015 (and, for an employer with a non-calendar year plan year, the months in 2016 that are part of the 2015 plan year), if an ALE member that is part of an ALE with 100 or more full-time employees (including full-time-equivalent employees) is subject to this payment, the number of full-time employees used to calculate the payment will be reduced by 80 rather than 30.  For more information on this relief, see section XV.D.7.b of the preamble to the employer shared responsibility provision regulations.

Interim Guidance for Multiemployer Arrangements