2015 was the year that the Affordable Care Act’s (ACA) employer mandate took effect, but certain facets of the law provided employers various forms of temporary relief designed to soften the transition into full compliance. As we approach the second year of compliance with the mandate, these forms of transition relief expire. Employers should take note of the heightened requirements that will result from the loss of transition relief in 2016.
ALE Calculation: Applicable large employers, or ALEs, are subject to the ACA’s employer mandate. To determine ALE status in 2015, employers were able to use any 6-month consecutive period in 2014 to calculate whether the employer employed an average of 50 or more full-time employees. To determine ALE status in 2016, employers will be required to use the full 12 months of the prior year.
Mid-Size Employer Relief: Most mid-size employers with between 50 and 99 full-time (and full-time equivalent) employees were spared from the requirement to comply with the employer mandate in 2015. However, these mid-size employers must be in compliance with the mandate no later than January 1, 2016 or, if the employer’s plan runs on a non-calendar year, no later than the first day of the 2016 plan year.
Offers of Minimum Essential Coverage: In 2015, an applicable large employer was required to offer minimum essential coverage to at least 70% of its full-time employees. Beginning on January 1, 2016, though, this threshold requirement increases to 95% of full-time employees.
Calculation of Penalty Payment: Employers that failed to offer minimum essential coverage to at least 70% of their full-time employees may be assessed a penalty equal to $2,000 per full-time, less 80 full-time employees. In 2016, this penalty calculation will be $2,000 per full-time employee, less 30 full-time employees, which results in a higher financial penalty.