Within the ACA’s current implementation schedule, 2015 is the year when the game is set to change. That’s because the employer penalties tied to the Employer Shared Responsibility (“Pay or Play”) mandate kick in as early as January 1, 2015. However, employers must take three key actions in 2014 in order to understand the impact of this mandate heading into 2015.

Action 1: Determine your size

ACA penalties apply to Applicable Large Employers (ALEs) who do not offer coverage or do not offer ACA-compliant coverage. An ALE is an employer with 50 or more full-time employees, including full-time equivalent employees (FTEs), during the prior year. Also important are the following considerations:

• ALEs with fewer than 100 full-time employees will not be subject to penalties until 2016. This relief applies only if the employer does not reduce its workforce size or employee hours without a bona fide business reason and maintains any previously offered coverage.
• The 50-99 count is determined based on the average number of full-time and FTE employees on business days in 2014. For 2015 only, this average can be calculated over any consecutive six month or greater period in 2014.
• Control group rules apply for counting employees.
• FTEs include common law, part-time, and seasonal employees

This determination is what allows an employer to understand whether or not it is subject to the employer mandate.

Action 2: Measure Your Hours

The ACA considers any employees that work 30 or more hours per week on average to be full-time employees eligible for coverage by ALEs. Two methods have been provided for determining full-time employee status:

• Monthly Measurement Period – This method requires full-time employees to be identified based on actual hours of service each month.
• Look Back Measurement Period – This method allows full-time status during a future period (a “stability period”) to be based on the hours worked in a prior period (the “measurement period”).

These measures will significantly shape how and when ALEs will offer coverage to employees, and will serve as the basis for employers to meet new ACA reporting requirements that go into effect in 2016.

Action 3: Develop your ACA strategy

Your first two ACA actions for 2014 set the table for you to determine your future strategy. Are you required to “pay or play?” If you are, how many employees would you potentially be required to cover? What type of coverage will you offer? Remember also that ACA penalties, the “B” version, apply if you are not offering coverage that complies with the ACA’s affordability and minimum value provisions as well as the mandates requiring coverage for dependents and a maximum waiting period of 90 days. Additionally, employers who do not offer coverage to all full-time employees can be exposed to both a “play” AND “pay” scenario.

Developing an ACA strategy for your organization requires both preparation and a purpose in order to avoid the unintended (and potentially expensive) consequences tied to non-compliance.

Refer to the PDF version of this post for an overview of the key changes to the Employer Shared Responsibility provisions based on the Final IRS Regulations released in February 2014.