ACA News & Publications

ACA Pathways: Final Play or Pay Regulations Issued Providing Additional Transitional Relief for Many Employers

February 11, 2014

On Monday, February 10, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Affordable Care Act (ACA), commonly referred to as the "play or pay" mandate, that take effect in 2015.

The final rules include a one year delay for medium‐sized employers. In 2015, the ACA's employer shared responsibility provisions will generally apply to larger firms with 100 or more full‐time employees. Employers with 50‐99 full‐time employees will have to comply starting in 2016. In addition, the final rules extend to 2015 a package of limited transition rules that applied for 2014 under the proposed regulations, and also include transitional relief for employers that offer coverage to most, but not all, full‐time employees in 2015.

The Treasury Department and IRS plan to issue further guidance to address remaining issues under the employer shared responsibility provisions. In addition, the Treasury Department and the IRS will issue final regulations shortly that aim to substantially simplify and streamline the employer reporting requirements.

Background: Play or Pay Mandate

The employer responsibility provisions generally require large employers (those with 50 or more full‐time equivalent employees) to offer substantially all of its full‐time employees health coverage that is both affordable and provides minimum value, or potentially be subject to a penalty. The play or pay mandate originally applied for months beginning on or after January 1, 2014. Proposed regulations were released on December 28, 2012, and transitional relief issued in July 2013, provided that no penalties would be assessed until January 1, 2015. Related information reporting requirements would also be delayed.

The following is a brief summary highlighting key provisions of the final regulations:

New Transitional Relief

  • Employers with between 50‐99 Full‐time Employees: Under these final regulations, employers with between 50 – 99 full‐time employees have an additional year to comply with the play or pay mandate. To qualify for this delay, the employer must provide an appropriate certification as described in the final rules.
  • Employers with at least 100 Full‐time Employees: In addition, even many large employers subject to the mandate in 2015 may have relief of a different kind. Under the proposed rules, applicable large employers needed to offer coverage to at least 95 percent of their full‐time employees to avoid the most significant penalties. The final rule provides transition relief that will phase in this requirement over two years, beginning in 2015. To avoid a payment for failing to offer health coverage in 2015, applicable large employers will need to offer coverage to only 70 percent of their full‐time employees. In 2016 and beyond, applicable large employers will need to offer coverage to 95 percent of their full‐time employees to avoid these penalties. This rule is intended to provide relief to employers that, for example, may offer coverage to employees working 35 or more hours per week, but not yet to those employees who work 30 to 34 hours per week.

Extension of 2014 Transition Relief

In addition to the two forms of 2015 transition relief noted earlier, a package of limited transition rules that applied for 2014 under the proposed regulations is extended to 2015 under the final regulations, including the following:

  • Employers First Subject to Shared Responsibility Provision: Employers can determine whether they had at least 100 full‐time or full‐time equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year. This will help facilitate compliance for employers that are subject to the employer shared responsibility provision for the first time.
  • Non‐Calendar Year Plans: Employers with non‐calendar year plan years will be able to begin compliance with the play or pay mandate as of the first day of their 2015 plan year, rather than on January 1, 2015, and the conditions for this relief are expanded to include more plan sponsors.
  • Dependent Coverage: The requirement that employers must offer coverage to their full‐time employees' dependents will not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.
  • Measurement and Stability Periods: On a one‐time basis, in 2014 preparing for 2015, employers using the look‐ back measurement method to determine full‐time status may use a measurement period of six months, even with respect to a stability period—the time during which an employee with variable hours must be offered coverage—of up to 12 months.

As these limited transition rules take effect, the Treasury Department and the IRS will consider whether it is necessary to further extend any of them beyond 2015.

Other Key Provisions in the Final Regulations

In addition to the transitional relief discussed above, there are several other significant outstanding questions addressed in the final regulations, including the following:

  • Determining Full‐time Status for Certain Employee Groups: The final regulations address whether hours contributed by certain employees or those in certain occupations are considered in determining full‐time status,including the following:
    • Bona Fide Volunteers. Hours contributed by bona fide volunteers for a governmental or tax‐exempt entity (e.g., volunteer firefighters) do not need to be counted.
    • Seasonal Employees. Seasonal employees are defined generally as those working six months or less, and generally will not be considered as full‐time employees.
    • Employees of Educational Institutions. Teachers and other educational employees are not to be treated as part‐time because school is closed or operating on a limited schedule for the summer.
    • Certain Student Workers. Hours worked by students pursuant to a federal or state work study program are not counted.
    • Adjunct Faculty. Until further guidance is issued, employers of adjunct faculty are to use a method of crediting hours of service for those employees that is reasonable in the circumstances and consistent with the play or pay mandate. However, the final regulations expressly allow crediting an adjunct faculty member with 2 1⁄4 hours of service per week for each hour of teaching or classroom time as a reasonable method for this purpose.
  • Determining Full-time Status of Variable Hour Employees: Like the December 2012 proposed regulations, the final rules allow employers to use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonal employees are full-time. Furthermore, in responding to comments, the final regulations also clarify the application of this method and the alternative monthly method of determining full-time status.
  • Affordability Safe Harbors: The final regulations adopt the affordability safe harbors that were in the proposed regulations that make it easy for employers to determine whether the coverage they offer is affordable to employees. These safe harbors permit employers to use the wages they pay, their employees' hourly rates, or the federal poverty level in determining whether employer coverage is affordable under the ACA.

Next Steps: Final Rules Simplifying Employer Information Reporting

Many comments on the proposed employer information reporting regulations have urged that final rules provide streamlined ways to comply with employer information reporting—especially for employers that offer highly affordable coverage to all or virtually all of their full-time employees. Others have asked for a single form for employer and insurer reporting provisions when possible. The Treasury and the IRS will issue final regulations shortly that aim to substantially simplify and streamline the employer reporting requirements.

The Treasury Press Release is available at:

The Treasury Fact Sheet is available at:

The Final Regulations are available at:

A link to IRS Q&As on the mandate is available at:

For More Information
For more information about this ACA Pathways or about any other health care reform-related provisions, please contact your Burnham Benefits consultant or Burnham Benefits at:

Burnham Benefits

This ACA Pathways is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The information contained in this ACA Pathways includes emerging health care news from a limited perspective and does not encompass all views. The information was selected from a wide range of sources selected on the basis of their potential impact on employers and/or their employee benefit plans. For more information, please contact Burnham Benefits.

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