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Transition Relief

Basic Information

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

  • Under the employer shared responsibility provisions, an applicable large employer (ALE) member may choose to either offer affordable minimum essential coverage that provides minimum value to its full-time employees (and their dependents) or potentially make an employer shared responsibility payment to the IRS. 

Transition Relief for 2014 

Although the employer shared responsibility provisions originally were to apply in 2014, the Treasury Department and IRS issued guidance, Notice 2013-45, providing that the employer shared responsibility provisions and the corresponding information reporting requirements will first apply in 2015.

Transition Relief for 2015

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 Fewer than 100 Full-time Employees (Including Full-time Equivalent Employees)

ALE with fewer than 100 full-time employees (including full-time-equivalent employees) in 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 ESRP 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, employers may instead base their 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 ESRP 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 ESRP regulations. 

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

Generally, if an employer fails to offer minimum essential coverage to a full-time employee for any day of a calendar month, that employee is treated as not having been offered minimum essential coverage during the entire month.  Under this relief, however, if an ALE member offers minimum essential coverage to a full-time employee no later than the first day of the first payroll period that begins in January 2015, the employee will be treated as having been offered minimum essential coverage for January 2015 for purposes of the employer shared responsibility provisions. For more information on this relief, see section XV.D.4 of the preamble to the ESRP regulations. 

5. Offers of Minimum Essential Coverage to Dependents

In general, an employer is considered to have made an offer of minimum essential coverage to a full-time employee only if it also makes an offer of minimum essential coverage to the full-time employee’s dependents.  However, for the 2014 and 2015 plan years, relief is available for this requirement as long as the employer meets certain conditions, including taking steps to offer minimum essential coverage to dependents and not dropping current dependent coverage.  For more information on this relief, see section XV.D.5 of the preamble to the ESRP 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 employers 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 employer offers minimum essential coverage to at least 70 percent of its full-time employees (and their dependents) for 2015, it may still be subject to the other type of employer shared responsibility payment that applies if a full-time employee receives the premium tax credit for purchasing coverage through the Health Insurance Marketplace.  For more information about this relief, see section XV.D.7.a of the preamble to the ESRP 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 to the ESRP 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 ESRP regulations.

Interim Guidance for Multiemployer Arrangements 

The preamble to the employer shared responsibility regulations provides an interim rule under which an employer may be treated as offering minimum essential coverage to an employee if the employer is required by a collective bargaining agreement or related participation agreement to make contributions for that employee to a multiemployer plan that offers, to individuals (and their dependents) who satisfy the plan’s eligibility conditions, minimum essential coverage that is affordable and that provides minimum value. Employers may rely on this interim rule until further guidance is issued.  For more information on this interim guidance, see section XV.E of the preamble to the ESRP regulations.

More Information

More detailed information about the employer shared responsibility provisions is available in our Questions and Answers. The Department of the Treasury and the IRS have also issued the following legal guidance related to the employer shared responsibility provisions:

More information is also available in this fact sheet issued by the U.S. Department of the Treasury.

 

Page Last Reviewed or Updated: 01-Nov-2016