Blog By: Beth Ede, SPHR
Employer Shared Responsibility Provision (Play or Pay)
Understanding the Requirement – Part I: Applicable Large Employer Determination
As we are all too well aware, full implementation of healthcare reform under the Affordable Care Act (ACA) is less than a year away. The most pressing aspect of the new system for employers is the “Employer Shared Responsibility” or “Play or Pay” requirements.
Under these requirements, “applicable large employers” must offer minimum essential coverage to all their full-time employees (beginning in 2014) and their dependents (beginning in 2015) or pay an “assessable payment” (penalty). Even employers that offer coverage may still have to pay a penalty if the coverage offered does not provide “minimum value” or if it is not “affordable”.
Let’s focus on what it means to be an “applicable large employer” for purposes of this ACA mandate.
Only applicable large employers are subject to this provision. An applicable large employer with respect to a calendar year is one that, during the prior calendar year, employed on average 50 full-time employees. In order to calculate the number of full-time employees for this purpose, employers must account for (1) actual full-time employees; and (2) the number of full-time equivalent employees (FTEs) – your part-time employees. Remember that a full-time employee is defined as one who is employed for 30 hours of service or more in a week (or 130 hours of service per month), calculated on a monthly basis in a calendar year. There are a number of considerations that play into this calculation, so be sure to review the guidance HERE to ensure your calculation is correct.
Even thought the hours of part-time workers are counted for purposes of determining whether an employer is an “applicable large employer”, the penalty will only apply with respect to the full-time employees. This means that the determination of whether or not an employee is full-time versus part-time is very important.
Also note that there is transition relief available for 2013 whereby employers only need to consider a consecutive six-month period of calendar year 2013 to determine if they must “Play or Pay” for 2014.