The Transition to 2014 Begins Now
NOTICE: As this blog was being published, we received notice that the employer mandate compliance deadline was being deferred from 2014 to 2015. We are awaiting word from Treasury as to whether the transition rules will roll over or be altered. Stay tuned for an updated blog soon.
Beginning in 2014, the Affordable Care Act (ACA) requires large employers to offer “affordable” health care coverage to every full-time employee (FTE) or pay a penalty. Employee FTE status and any associated penalties for not offering coverage is determined on a monthly basis. However, there is a “look-back” safe harbor that allows employers to use periods longer than a month to determine if an employee has FTE status and should be offered coverage.
In order to use the look-back safe harbor an employer must choose a measurement period (MP), a stability period (SP), and an optional administrative period (AP). Normally, the MP must be followed by a SP of equal length. There is a transitional rule for 2014, allowing an employer to use a MP as short as 6 consecutive months with a 1 year SP. To use the transitional rule the MP must begin no later than July 1, 2013, and end no earlier than 90 days before the first day on the plan year beginning in 2014. Here are some examples of how the transitional rules could be used:
Under the transition rule, a calendar year plan could begin its MP on 7/1/2013, have no AP, and begin its 1 year SP on 1/1/2014.
Under the transition rule, a calendar year plan could use a MP that starts 4/15/2013 and ends on 10/14/2013, an AP that runs from 10/15/2013 to 12/31/13, and a 1 year SP that begins on 1/1/2014.
Under the transition rule, a 7/1 fiscal year plan could begin its MP on 7/1/2013 and end it on 4/30/14, begin its AP on 5/1/14 and end it on 6/30/14, and begin its 1 year SP on 7/1/14.
Using the transitional rules could assist you with strategic planning for the implementation of ACA. For more information please contact your Keenan Representative.