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- Healthcare Reform
Beginning in 2014, the Affordable Care Act (ACA) imposes “pay or play” requirements on large employers (Groups of 50+ employees*) . Under these “pay or play” requirements, large employers that do not offer health coverage to their full-time employees and their dependents, or that offer coverage that is either unaffordable or does not provide minimum value, may be subject to a penalty. This penalty is also referred to as a “shared responsibility payment.”
On Jan. 2, 2013, the Internal Revenue Service (IRS) published proposed rules that provide further guidance on the employer shared responsibility provisions, including the requirement to cover dependents. These proposed rules:
- Clarify the term “dependent” for purposes of the coverage requirement; and
- Provide transition relief for plan years that begin in 2014.
The regulations are not final. However, employers may rely on the proposed regulations until final regulations or other applicable guidance is issued.
This Insure NW Legislative Brief describes the dependent coverage requirements in the employer shared responsibility provisions.
Who qualifies as a dependent?
The proposed regulations clarify that, starting in 2014, an applicable large employer must offer health coverage to both its full-time employees and their dependents to avoid the shared responsibility payment. The term “dependent” is defined as an employee’s child who is under 26 years of age. An employee’s child includes a natural son or daughter, adopted child, stepchild and foster child.
For these purposes, “dependent” does not include any other individual, including the employee’s spouse. This means that employers are not required to offer coverage to an employee’s spouse under the employer shared responsibility provisions, and will not be liable for any penalty due to failure to offer coverage to an employee’s spouse.
Despite the dependent coverage requirement, an employer’s liability for the shared responsibility payment is triggered only by a full-time employee receiving a premium tax credit, regardless of whether any dependents are eligible for, or receive, a premium tax credit.
Transition Relief for Dependent Coverage Requirements
The IRS recognizes that a number of employers currently offer employee-only coverage, and that expanding their health plans to include dependent coverage will require substantial revisions to their plans. Therefore, the proposed regulations provide transition relief with respect to dependent coverage for plan years that begin in 2014.
Any employer that does not offer coverage to dependents during the 2014 plan year will not be liable for a penalty for that plan year as long as it takes steps toward offering dependent coverage during the year.
If you have questions about meeting the proposed requirements contact Insure NW. We can help.
*Please Note: Groups with fewer that 50 full time equivalent employees do not have to offer benefits at all. However, group plans in 2014 may be more attractive to employers than individual plans in the Exchange in Washington State.
Source: Internal Revenue Service