ERIC Urges Regulators To Ensure Employers Have Flexibility In Implementing Shared Responsibility Provisions

The ERISA Industry Committee (ERIC) has offered of series of follow-up recommendations on applying and implementing the safe harbor methods for determining full-time employee status under the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA).

The Treasury Department and Internal Revenue Service on Aug. 31, 2012, published Notice 2012-58 requesting comments on optional safe harbors described in earlier guidance that employers may use to determine which employees must be considered to be full-time employees for purposes of the shared responsibility penalty under Code Sec. 4980H.

Unanswered questions. ERIC commended the agencies for the overall structure of the safe harbors contained in Notice 2012-58 and prior notices, and believes the flexibility provided by the safe harbors is essential to ensuring that large employers are able to administer the shared responsibility provisions efficiently. ERIC’s letter further notes, however, that while the agencies have provided helpful guidance and safe harbors that address some of the technical issues involved in identifying full-time employees, many fundamental questions remain unanswered.

“ERIC’s members are concerned…that they will be required to make a significant investment of time and money in order to develop systems for complying with the shared responsibility rules at a time when many fundamental questions remain unanswered, and in circumstances in which vital safe harbors might be available only on a temporary basis,” wrote Scott Macey, ERIC president and chief executive officer, and Gretchen Young, senior vice president for health policy.

Safe harbors. In addition, ERIC’s members believe that the safe harbors for determining affordability and measuring full-time status can be made more flexible and workable, so that they will operate more efficiently going forward. ERIC’s recommendations include, among other things, that the safe harbors for determining affordability and measuring full-time status be made permanent and include additional options, that generous transition rules should apply until final regulations are issued, and that employers should be able to use different measurement periods and stability periods for different groups of employees.

The letter explains that it is extraordinarily challenging for large employers to determine which employees are full-time employees and whether full-time employees are eligible at all relevant times for affordable health coverage.

“As matters now stand, employers do not know which individuals are covered by the shared responsibility provisions, what hours to track for individuals who move between businesses or work for more than one business within a controlled group, or how to treat individuals whose status changes during the year,” Macey and Young contend.

No investment of resources yet. ERIC’s letter argues that until these fundamental questions have been answered in final regulations, employers should not be required to invest scarce resources in developing administrative systems, programming software, negotiating contracts with third-party administrators and other vendors, hiring and training staff, and taking the other steps necessary to track working hours for a large and diverse workforce with the accuracy necessary to ensure that they offer minimum essential health coverage to “substantially all” full-time employees.

ERIC’s recommendations on the shared responsibility provisions include:

• The affordability safe harbor should include options based on total wages;
• The agencies should provide an alternative affordability safe harbor based on the minimum wage;
• During the transition period, an employer should be able to avoid a penalty by offering coverage after notice that an employee is eligible for financial assistance;
• Employers should be able to use measurement and stability periods for some groups and not for others;
• Employers should be able to use different measurement and stability periods for acquired employees; and
• Employers should have flexibility to change measurement and stability periods.

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