On Monday, February 10, 2014, the IRS released final regulations on the Affordable Care Act’s (ACA) employer “shared responsibility” provisions, also known as the “pay-or-play” mandate.

The final regulations weigh in at 227 pages. We will review them over the coming days and will release additional communication pieces once we fully digest these new regulations. In the meantime, below are some highlights of the new guidance.


  • For 2015, the rules will apply to employers with 100 or more full-time employees. Employers in the 50-100 range will need to certify eligibility for this transition relief and must meet other requirements, including not reducing the employer’s workforce to qualify for transition relief and maintaining previously-offered coverage.
  • For 2016, the rules will apply to employers with 50 or more full-time employees.
  • To avoid a penalty in 2015, employers subject to the mandate must offer coverage to 70% of their full-time employees or risk penalties for failure to offer coverage to all full-time employees and dependents.
  • To avoid a penalty in 2016, employers subject to the mandate must offer coverage to 95% of their full-time employees (and dependents).
  • Employers with non-calendar year plans are subject to the mandate based on the start of their 2015 plan year rather than on January 1, 2015, and the conditions for this relief are expanded to include more employers. The IRS is evaluating whether this relief will extend to employers who first become subject to the mandate in 2016.
  • Importantly, the transition relief included in the proposed regulations for multiemployer plans has been continued indefinitely. Under this transition relief, an applicable large employer will not be subject to shared responsibility penalties with respect to employees for whom the employer is required by the collective bargaining agreement or appropriate related participation agreement to make contributions to the multiemployer plan.
  • Other transition relief contained in the proposed regulations was also extended, including the ability to use a short timeframe (at least 6 months) to determine whether an employer is large enough to be subject to the mandate, a delay in the requirement to provide coverage to dependent children to 2016 (as long as the employer is taking steps to arrange for such coverage to begin in 2016), and the permitted use of a short measurement period in 2014 to prepare for 2015.


  • Volunteers: Hours contributed by bona fide volunteers for a government or tax-exempt entity, such as volunteer firefighters and emergency responders, will not cause them to be considered full-time employees.
  • Educational employees: Teachers and other educational employees will not be treated as part-time for the year simply because their school is closed or operating on a limited schedule during the summer.
  • Seasonal employees: Those in positions for which the customary annual employment is six months or less generally will not be considered full-time employees.
  • Student work-study programs: Service performed by students under federal or state-sponsored work-study programs will not be counted in determining whether they are full-time employees.
  • Adjunct faculty: Until further guidance is issued, employers of adjunct faculty may credit an adjunct faculty member with 2 ¼ hours of service per week for each hour of teaching or classroom time.


  • The final regulations do not provide safe harbor relief for employers hiring independent contractors. Instead, employers need to determine who their employees are based on a common law standard without regard to rules, such as “section 530 relief” applicable in the employment tax area.
  • The regulations also do not provide any specific relief for employers in “high turnover” industries.
  • Employers who hire workers through staffing agencies need to consider a new rule. For an offer of coverage to an employee performing services for an employer that is a client of a staffing agency, in cases where the staffing agency is not the common law employer of the worker and the staffing firm makes an offer of coverage to the employee on behalf of the client employer under a staffing agency plan, the offer is treated as made by the client employer for pay-or-play purposes only if the fee the client employer would pay to the staffing agency for an employee enrolled in health coverage is higher than the fee the client employer would pay the staffing agency for the same employee if that employee did not enroll in health coverage.

The IRS is also evaluating how to best simplify the employer reporting requirements set to apply in 2015. The IRS expects to release additional guidance shortly that aims to substantially simplify and streamline these reporting requirements.

The bottom line is that employers need to consider how they will implement the new rules and create or adjust their systems to capture their full-time employee population.

The final regulations are available here: https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-03082.pdf

An IRS Q&A is available here: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act#Liability