If a large employer has a non-calendar-year plan and can meet certain transitional rules, it can delay offering health benefits until the start date of its 2015 plan year. Similarly, a mid-size employer (including those with non-calendar-year plans) that meets another set of rules can delay offering benefits until the start of its 2016 plan year. Finally, an unrelated set of transitional rules related to community rating under the ACA has created questions regarding the total effect when a plan year changes its effective dates.
Mid-Size Employer Transition Relief (Maintenance Requirements)
For a mid-size employer to qualify for transitional relief (i.e., delay offering health benefits until January 2016 or the start of its 2016 plan for non-calendar year plans), it must meet a set of maintenance requirements. The maintenance requirements are that the employer be able to certify (on IRS reporting form 1094-C) that during the period beginning on February 9, 2014, and ending on the last day of the plan year that begins in 2015, the employer:
- Has not modified the plan year of its plan after February 9, 2014, to begin on a later calendar date;
- Has not reduced the size of its workforce or the overall hours of service of its employees so that it could qualify for this delay, and
- Has not eliminated or materially reduced any coverage it had in effect on February 9, 2014. A material reduction means that:
o The employer’s contribution is either less than 95 percent of the dollar amount of its contribution for single-only coverage on February 9, 2014, or is a smaller percentage than the employer was paying on February 9, 2014;
o A change was made to the benefits in place on February 9, 2014, that caused the plan to fall below minimum value; or
o The class of employees or dependents eligible for coverage on February 9, 2014, has been reduced.
Employers with 50 to 99 employees that are newly offering coverage to some employees, or that only offer coverage to a few employees, are eligible for the delayed effective date as long as they do not make changes that would violate the maintenance requirements. Employers with 50 to 99 employees that have not previously offered any coverage have until January 1, 2016, to offer coverage without risking penalties.
An employer with 50 to 99 employees that does not meet the maintenance requirements will be subject to the play or pay requirements, and penalties, as of January 1, 2015.
Non-Calendar Year Transition Relief
Employers subject to play or pay with non-calendar-year plans do not need to comply until the start of their 2015 plan year if they meet the plan year transition rules. Under the plan year transition rules, the play or pay requirements do not apply until the start of the 2015 plan year if:
- The employer had a non-calendar-year plan in place on December 27, 2012;
- The employer has not moved the plan year to a later date since December 27, 2012, (e.g., did not move from a July 1 to a December 1 plan year);
- Any of these four criteria are met:
o Actually covered one-fourth of all employees (full-time and part-time) on any day between February 10, 2013, and February 9, 2014;
o Actually covered one-third of full-time employees (30+ hours/week) on any day between February 10, 2013, and February 9, 2014;
o Offered coverage to one-third of all employees during the last open enrollment; or
o Offered coverage to half of full-time employees during the last open enrollment; and
- Affordable, minimum value coverage is offered to applicable employees as of the start of the 2015 plan year.
This piece of transition relief is for all applicable large employers with a non-calendar year plan.
Mid-Size Employers: Which Piece Applies? How Long Do Employers Have?
The following chart provides the date a plan should begin complying with play or pay requirements, depending on which transition relief requirements it did or did not meet.