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The Scoop On Applicable Large Employer (ALE) Transition Relief

There’s relief!  At least for some qualifying groups who may be affected by changes implemented with the ACA.  New provisions, known as the “large employer mandate,” originally required certain large employers, (those with 50 or more full-time employees) to offer health coverage that is both affordable and meets minimum value to a percentage of employees or face financial penalties.

The original effective date for this provision was last January (2014), but the agency in charge realized that the mandate  failed to take into account health plans offered on a non-calendar year or fiscal year basis. The result? Transition relief granted to accommodate these types of plans as well as extending more time to all impacted ALEs to prepare for the new rules. The new effective date is January 1, 2015, for certain ALEs with standard calendar plans.

Are you considered an Applicable Large Employer? (ALE)

You are if you have 50 or more full-time and full-time equivalent employees in the prior calendar year. Large employer status also applies if a business is part of a controlled group or commonly-owned. In this case, employees from all the related businesses are tallied and considered one entity. If the aggregate number of full-time employees is 50 or greater, you are an ALE and the new law applies.

There’s Relief for Some ALEs

Transition Relief continues until January 2016 for employers that meet certain criteria and made no intentional changes (to escape new ACA mandates) to their plans between February 9, 2014, and December 31, 2014:

ALEs with 50-99 full-time equivalent employees MUST NOT:
  1. Impermissibly reduce the size of its workforce or the overall hours of service of its employees in order to get down to 50-99 full-time equivalent employees;
  2. Eliminate or materially reduce the terms of its sponsored group health coverage existing on February 9, 2014, including: Change the plan year start date; and
    • Reducing the minimum value of the plan;
    • Changing the class of employees eligible for coverage;
    • Contributing less than 95% of the dollar amount then contributed
  3. Change the plan year start date; and
  4. Fail to file with the proper agency a form proving its eligibility for transitional relief
  • ALE with a non-calendar year health plan:
  •  Standard Rule:
  • An employer will face no penalty for any month prior to the first day of the 2015 plan year, IF:
  1.  The plan was in place as of December 27, 2012;
  2.  The employer did not modify the plan at any point thereafter to move the first day of the plan year to a later calendar date, and
  3. The plan provides affordable coverage that meets the minimum value threshold as of the first day of the 2015 plan year to employees who, under the terms of a plan in effect as of February 9, 2014, are eligible as of the first day of the 2015 plan year
  • Significant Percentage Rule:
    • Additional relief is available to any employer that, as of any date in the 12-month period ending on February 9, 2014:
  1.  Covered at least 25% of its employees, or offered coverage under the plan to at least 33% of its employees during the last enrollment period prior to February 9, 2014; or
  2.  Covered at least 33% of its full-time employees, or offered coverage under the plan to at least 50% of its full-time employees during the last enrollment period prior to February 9, 2014

Any ALE that meets either of these rules can wait until its plan anniversary to comply with the large employer mandate.

If the rules don’t apply- get ready!

Qualifying ALEs with 100 or more full-time employees and full-time equivalents who don’t qualify for either transition relief scenario, must comply with the large employer mandate by January 2015. To avoid penalties for 2015, these ALEs must offer affordable, minimum value coverage to at least 70% of their full-time employees (and their dependent children up through the month in which they turn 26). This threshold rises to 95% for years 2016 and beyond and will apply to all ALEs.