Towards the end of January, the IRS announced its final rules for health care costs based on the health care reform from President Barack Obama. The rules from the IRS govern the employer mandate section of the Affordable Care Act. The provision takes effect in 2014 and it will require companies with 50 or more employees to offer affordable health care coverage to those employees or face tax penalties.
The rules finalized by the IRS include how to calculate full-time employees, including paid-leave hours, delayed start for non-calendar year plans, and determining employer-size status.
Calculating Full-Time Employees
The limit for penalties on large employers has been set at 50 full-time employees and full-time equivalents by the act when determining health care costs. The IRS proposed to set the limit at all employees who work 30 hours per week as full-time employees. To calculate the equivalent, the company would have to add the hours worked by part-time employees per month and then divide it by 120.
Including Paid-Leave Hours
The IRS suggested that in this category, when a company uses hours to determine full-time status it has to include hours where compensation is due but no work was completed. Ultimately, this means that hours for jury duty, an illness, maternity leave, and paid vacation should all be counted towards full-time employment hours.
Delayed Start for Non-Calendar Year Plans
With the new law, employers have been wondering if they have to begin their plans on January 1, 2014 (when the new law takes effect), or if they can wait for the start of their fiscal 2014 year. The reason for this is that when January 1, 2014 rolls around, some companies might be in the middle of an active health care plan for employees. The new regulations from the IRS permit companies to wait until their fiscal 2014 year begins before offering the affordable health care costs. Large companies will not be penalized under the new regulations until after their fiscal 2014 year starts.
Determining Employer-Size Status
Under the new law, companies are required to report their employee status annually as either large or small. They can do this simply by counting the number of employees and equivalents on their payrolls for each month of the prior calendar year. The provision for the first year is that companies can select any six-month period from 2013, count their employees, and issue their size status for 2014. Penalties for not providing affordable health care costs to employees' dependents will be held off until 2015.
Source: The Washington Post