The Affordable Care Act’s Employer Responsibility provisions will require employers that average 50 or more workers (including full-time equivalents) during the preceding calendar year to either offer coverage to 95 percent of its full-time workers (30 hours per week) or pay a penalty equaling $2,000 per full-time worker less 30. This significant penalty – which consultants are now calling the “sledgehammer penalty” – could apply for all full-time workers even if most workers (but less than 95%) receive an offer of coverage.
The sledgehammer penalty differs from the “tack-hammer penalty” that would impose a $3,000 per worker penalty if a low-income employee decides to seek exchange coverage after being offered coverage that does meet actuarial value or affordability minimums. We believe most employers will want to avoid the sledgehammer penalty at all costs, whereas they may be OK paying the tack-hammer penalty for a small percentage of workers.
That’s why documenting employees’ work hours is important, especially in situations where seasonable and variable hour employees are utilized. Employers will want to be sure they have documented that they appropriately measure (per the regulations) and made an offer of coverage to employees they determined to be full-time, so if one or two slips through the cracks they have documentation for 95 percent or more of their workforce.
Final pay-or-play regulations offer a safe harbor for employers in this regard. It allows an employer to categorize full vs. part-time workers during a “measurement period” which then must be followed by a stability period of an equal length. But as a transition rule in 2013, employers can use any six-month measurement period followed by a 12-month stability period in 2014. To qualify for this transition rule, however, employers must begin counting hours by July 1. The sooner the better, since employers will want time for the administration of benefits.
The Alliance provides several resources to help navigate Pay or Play. Visit our page here.
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