When the Employer Mandate applies to noncalendar year plans in 2014

By Larry Grudzien
Attorney at Law

An employer’s health plan’s plan year begins on September 1 each year. If the employer is a “large employer” under health care reform, when is the employer subject to the employer mandate, January 1, 2014 or September 1, 2014?

The employer mandate is generally effective on January 1, 2014. However, two transition rules apply that may delay the assessment of penalties until the first day of your first plan year that starts on or after January 1, 2014. The transition rules say that if the employer  maintained a noncalendar year plan as of December 27, 2012, and all of its  full-time employees are offered affordable coverage that provides minimum value no later than that first day of the plan year that starts in 2014, penalties will not be assessed for the months prior to the first day of the plan year that starts in 2014 for:  

1. Any employee (whenever hired) that would be eligible for coverage, as of the first day of the first plan year that begins in 2014 under the eligibility terms of the plan as in effect on December 27, 2012; and 
2. Any other employees if (a) the employer’s noncalendar year plan was offered to at least one third of its employees (full-time and part-time) at the most recent open season; or (b) its noncalendar year plan covered at least one quarter of its employees (full-time and part-time). 

Therefore, for any employees who are eligible to participate in the plan under its terms as of December 27, 2012 (whether or not they take the coverage), the employer will not be subject to a penalty for those employees until the first day of it noncalendar plan year that starts in 2014 if employees are offered affordable coverage that provides minimum value no later than that first day of the plan year that starts in 2014.
 

For any other employees that were not eligible to participate under the terms of the plan in effect on December 27, 2012, if the employer offered coverage under its noncalendar year plan starting on September 1, 2012 to at least one third of your employees, or if the plan covered at least one quarter of its employees, the employer could avoid liability for a penalty until September 1, 2014 if it expands the plan to offer coverage that is affordable and meets the  minimum required value to the full-time employees who had previously not been offered coverage. For purposes of determining whether the plan covers at least one quarter of the employees, the employer can use any day between October 31, 2012 and December 27, 2012 for doing the calculation.