ACA Compliance Just Got Easier (For Now): The IRS Extends Compliance Deadline to January 1, 2015

Under the Affordable Care Act (ACA), employers with more than 50 employees will be required to provide health care for their full-time employees or face penalties.  The ACA particularly affects dining, hospitality, and retail establishments, many of which employ more than 50 employees (and, due to traditionally high turnover rates, many do not provide health insurance).  But for any business affected by the ACA, the task of complying with the new law can be daunting.

Compliance Deadline Postponed for One Year

Unsurprisingly, the IRS has received overwhelming feedback that employers are not yet ready to comply with the ACA.  Originally, the deadline for compliance with coverage and reporting requirements was January 1, 2014.  Perhaps fearing that many would rather pay the penalty than attempt to figure out the new law, the IRS is giving employers a break.  The agency recently announced that the ACA compliance deadline would be extended one year: employers now have until January 1, 2015 to provide coverage under the Act.  The IRS also recently published official guidance aimed at smoothing the transition to mandated coverage by helping businesses understand the new requirements.

Senate Considering Change in ACA Definition of “Full Time”

In another development that may ease the ACA’s burden on employers, a Senate committee is considering a bill that would amend the ACA to redefine “full-time” as 40 hours, as opposed to 30 hours as currently defined in the ACA.  The bipartisan legislation would address two problems with the ACA.  First, it would reduce the incentive for employers to cut employees’ hours to fewer than 30 in order to avoid paying for their health coverage.  By redefining full-time as 40 hours, that perverse incentive would be reduced: if an employer does cut or limit employees’ hours to below the full-time level, at least the affected employees could work (and be paid for) a full workweek.  Second, the proposed bill would eliminate the present inconsistency with federal labor laws, which define a workweek as 40 hours.

Continue to Prepare Now for Compliance in 2015

The extended deadline and official guidance should help more employers come into substantial compliance with the ACA.  Additionally, the proposed amendment to the ACA might make compliance easier and less expensive.  However, if you manage a covered business, don’t be overly complacent!  Make use of the extra time you have been given – read the guidance, seek professional counsel if necessary, and plan for 2015.  When the deadline arrives, the IRS will probably be less forgiving toward businesses who did not take advantage of the reprieve.