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Mondress Monaco Parr Lockwood PLLC
Mondress Monaco Parr Lockwood PLLC

Health Care Reform: Summary of Final “Play or Pay” Regulations April 2014

In February 2014, the Treasury Department issued final regulations under Internal Revenue Code ("Code") Section 4980H, more commonly known as PPACA's "Play or Pay" or "Employer Shared Responsibility" rules. This bulletin provides a summary of the final regulations and the Play or Pay rules generally.

1. What is the Effective Date of the Play or Pay Rules?

The Play or Pay rules were originally scheduled to go into effect on January 1, 2014. However, in July 2013, the IRS issued guidance (IRS Notice 2013-45) delaying their effective date until January 1, 2015. The final regulations do not change the general January 1, 2015 effective date, but they do contain a number of important transition rules that delay their applicability in certain situations. Most notably, employers that maintain fiscal year plans are excused from compliance with the Pay or Play Rules until the start their 2015 plan year if certain requirements are met1. More limited transition rules that apply only to particular aspects of the rules are described in the Q&As that follow.

2. What Employers are subject to the Play or Play Rules?

The Play or Pay rules apply only to "applicable large employers" ("ALE") – generally defined as employers with an average of at least 50 full-time employees during the prior calendar year. A full-time employee is one who works an average of at least 30 hours/week during a month. Under the regulations, working 130 hours in a calendar month may be treated as equivalent to working 30 hours/week during that month. Solely for purposes of determining ALE status, part-time employees are also counted – this is done on an equivalent basis (their monthly hours are aggregated and divided by 120,2 with the result added to the employer's actual full-time employee headcount for that month). A special rule exempts employers with seasonal workers3 if (a) the number of days the employer had more than 50 full-time employees during the prior year was no more than 120, and (b) the employees in excess of 50 on those days were seasonal workers. During an employer's first year of existence, ALE status is based on whether the employer reasonably expects to and actually does employ an average of 50 or more full-time employees during business days in that calendar year. The Code's control group rules apply in determining whether entities in a control group are ALE members, but each entity's actual compliance with the Play or Pay Rules is evaluated separately4.

The final regulations contain two transition rules concerning ALE status for 2015. First, the ALE full-time employee threshold for 2015 is raised from 50 to 100 for employers that meet specified conditions.5 Second, employers are permitted to choose any 6-consecutive month period during 2014 to determine their ALE status for 2015 (normally, the entire prior calendar year must be used). Additionally, the final regulations contain a special non-assessment rule that applies during the first year that an employer becomes an ALE. Under this rule, an ALE will be exempt from Play or Pay penalties during the first three months of the year with respect to any full-time employees not previously eligible for coverage as long as they are offered minimum value coverage by no later than April 1st.6

3. How do the Play or Pay Penalties Work?

There are two separate Play or Pay penalties: (1) the "No Offer" penalty under Code Section 4980H(a), and (2) the "Inadequate/Unaffordable Coverage" penalty under Code Section 4980H(b). Both are triggered only if a full-time employee enrolls in coverage under an Exchange and qualifies to receive a premium tax credit or cost-sharing reduction with respect to such coverage ("Subsidized Exchange Coverage"). Importantly, the Play or Pay penalties are not tax deductible.

Subsidized Exchange Coverage: Employees can qualify to receive Subsidized Exchange Coverage only if, among other requirements:

  • Their household income is between 100% and 400% of the federal poverty line ("FPL");7
  • They are not enrolled in "minimum essential coverage" ("MEC"). In general, MEC includes coverage under government sponsored programs (e.g., Medicare, Medicaid, CHIP, and TRICARE), individual health insurance policies, and eligible employer-sponsored plans; and
  • They were not offered employer-sponsored coverage that provided "minimum value" (MV) and was "affordable." Generally speaking, employer-provided coverage provides MV if the plan's share of the total allowed benefit costs is at least 60%,8 and coverage is considered affordable if the employee's premium for self-only coverage is no more than 9.5% of income.9

4980H(a) No-Offer Penalty: An employer that is an ALE is subject to the No Offer penalty for a month if, for that month, (a) it failed to offer coverage to "substantially all" full-time employees and their dependents, and (b) at least one full-time employee received Subsidized Exchange Coverage. The term "substantially all" generally means at least 95%10 of the employer's full-time employees. However, through the end of an employer's 2015 plan year, a lower threshold of 70% applies. "Dependents" for purposes of the No Offer penalty are limited to an employee's biological and adopted children under age 26.11 Under a transition rule in the final regulations, an employer has through the end of its 2016 plan year to add or make changes to dependent coverage as necessary to satisfy the dependent coverage offer requirement.12 An employer's offer of coverage does not have to provide MV or be affordable in order avoid the 4980H(a) No Offer penalty13. The 4980H(a) No Offer penalty is calculated as follows for each month that it applies: [1/12 x $2,00014] x [the employer's # of full-time employees minus 3015].

4980H(b) Inadequate/Unaffordable Coverage Penalty: An employer that satisfies the 4980H(a) offer requirement may nevertheless be subject to a different penalty – the 4980H(b) Inadequate/Unaffordable Coverage penalty – if any full-time employee receives Subsidized Exchange Coverage for a month. This is possible only in the following two scenarios:

  • Scenario #1: The coverage offered by the employer is affordable and provides MV but it is not offered to every single full-time employee (just "substantially all" of them, as necessary to avoid the No Offer penalty), and one or more of the full-time employees who didn't receive an offer of coverage enrolls in and receives Subsidized Exchange Coverage.
  • Scenario #2: The coverage offered by the employer is either unaffordable or fails to provide MV (or both), and one or more full-time employees declines the coverage (or wasn't offered the coverage, as described under Scenario #1), and enrolls in and receives Subsidized Exchange Coverage.

The 4980H(b) Inadequate/Unaffordable Coverage penalty is calculated as follows for each month that it applies: [1/12 x $3,00016] x [the employer's # of full-time employees who received Subsidized Exchange Coverage]. The 4980H(b) penalty is capped at the amount that would have been assessed under the 4980H(a) No Offer penalty had it applied.

Limited Non-assessment Periods: The final regulations include various "limited non-assessment periods," which are periods during which an employer's failure to offer coverage to particular full-time employees is disregarded for 4980H penalty purposes. For employees hired mid-month, their first partial month of employment is always a limited non-assessment period. Other limited non-assessment periods are described in the Q&As that follow.

4. Who is a Full-Time Employee for Purposes of the Play or Pay Penalties?

The final regulations provide two methods that employers can use in identifying "full-time" employees for Play or Pay penalty purposes: (a) the Monthly Measurement Method, and (b) the Look-Back Measurement Method. These are the only permissible methods.17

Monthly Measurement Method: Under this method, an ALE counts an employee's hours worked during a given month to determine his or her status for that particular month. Employees who average at least 30 hours/week during the month are full-time for Play or Pay purposes, and employees who average less than 30 hours/week during the month are not. (Under the regulations, working 130 hours during a month may be treated as equivalent to working 30 hours/week during the month.) An alternative monthly equivalency method is available that uses weekly periods that end in (or begin in) a month.18 A 4980H limited non-assessment period applies under this method for the first three full months an employee is otherwise eligible for coverage (i.e., eligible but for the completion of a waiting period), as long as they are offered coverage by no later than the first day of the following month (if still employed).19 Because it is not possible to retroactively offer coverage to employees if they are determined to have averaged 30 or more hours/week during a particular month, this method is not very useful for employers who wish to avoid Play or Pay Penalties unless they know with certainty which employees could possibly average at least 30 hours/week during a month and offer them coverage ahead of time.

Look-Back Measurement Method: Under this method, an employee is treated as full-time (or not) for Play or Pay purposes during a particular period (called a "stability period") based on whether or not they averaged 30 or more hours/week during a prior period (called a "measurement period"). The rules are different for new and ongoing employees, as described in Q&As 5 and 6, below. An employee is a "new" employee until the end of their first full standard measurement period, at which point they become an "ongoing" employee.

As explained by the IRS, these methods "prescribe minimum standards for the identification of full-time employee status [for 4980H purposes]. Employers always may make additional employees eligible for coverage, or otherwise offer coverage more expansively than required."20

5. How does the Look-Back Measurement Method Work for New Employees?

The Look-Back Measurement Method rules for new employees differ under the regulations depending on which of the following four categories the employee is in:

  • Full-Time Employees: Employees (other than a Seasonal Employees) who are reasonably expected as of their start date to average at least 30 hours/week.
  • Part-Time Employees: Employees who are reasonably expected as of their start date to average less than 30 hours/week.
  • Variable Hour Employees: The ALE cannot determine as of the employees' start date whether they are reasonably expected to average at least 30 hours/week because their hours are variable or otherwise uncertain.
  • Seasonal Employees: Employees hired into a position for which the customary annual employment is 6 months or less.

The determination of a non-Seasonal Employee's category is based on all relevant facts and circumstances, including the following: (a) whether the new employee is replacing an employee who was (or was not) a full-time employee; (b) the extent to which the hours worked by ongoing employees in the same or comparable positions have varied above and below an average of 30 hours/week during recent measurement periods; and (c) whether the job was advertised or otherwise communicated to the new hire or otherwise documented (e.g., through a contract or job description) as requiring work averaging more or less than 30 hours/week.

New Variable Hour, Part-Time and Seasonal Employees are subject to an initial measurement period in which their hours of work are counted. If they average at least 30 hours/week during their initial measurement period, they are treated as "full-time employees" for Play or Pay purposes during the associated initial stability period and, conversely, if they average less than 30 hours/week during their initial measurement period, they are treated as non-full-time employees during that stability period. The initial measurement period must start by no later than the first day of the month after the employee's start date and must be between 3 and 12 months in length, with the associated initial stability period beginning immediately thereafter (or immediately following the end of an optional "administrative period" of up to 90 days).21 The initial stability period must generally be the same length as the initial measurement period, with the following exceptions: For employees who average less than 30 hours/week during their initial measurement period, the initial stability period during which they are treated as non-full-time employees cannot extend beyond the start of their first standard stability period as an ongoing employee. In contrast, for employees who average at least 30 hours/week during their initial measurement period, the initial stability period during which they are treated as "full-time" must last at least 6 months, and will generally extend into their first standard stability period as an ongoing employee. A 4980H limited non-assessment period applies to Variable Hour, Part-Time and Seasonal Employees who average at least 30 hours/week during their initial measurement period, provided they are offered coverage by the start of their initial stability period (if still employed).22

New Full-Time Employees do not have an initial measurement or stability period. Rather, the Monthly Measurement Method (described above) applies to them until they become ongoing employees. A 4980H limited non-assessment period applies to new Full-Time Employees during their first three full months of employment, provided they are offered coverage by no later than the first day of the following month (if still employed).23 As a practical matter, the combination of these rules essentially means that new Full-Time Employees need to be offered coverage from the first day of their fourth month of employment until they become an ongoing employee if an employer wishes to guarantee it will have no Play or Pay liability with respect to the employee.24

6. How does the Look-Back Measurement Method Work for Ongoing Employees?

Once an individual becomes an ongoing employee, the above-described employee categories (Variable Hour, Full-Time, Part-Time and Seasonal) are no longer relevant. Instead, all ongoing employees are subject to measurement/stability periods, regardless of the employer's expectations regarding the average hours/week they will work. Similar to the measurement/stability period rules for new employees, an ongoing employee's hours are counted during a "standard" measurement period. If they average at least 30 hours/week during that measurement period, they are treated as "full-time employees" for Play or Pay purposes during the associated stability period and, conversely, if they average less than 30 hours/week during that measurement period, they are treated as non-full-time employees during that stability period. Standard measurement periods must be between 3 and 12 months in length, with the associated stability period beginning immediately thereafter (or immediately following the end of an optional "administrative period" of up to 90 days). The stability period must generally be the same length as the measurement period, except that it cannot be shorter than 6 months for employees who are treated as full-time.25 There are no limited non-assessment periods under the Look-Back Measurement Method for ongoing employees – an ongoing employee who is treated as "full-time" for Play or Pay purposes during a stability period must be offered coverage or 4980H penalties may apply.

7. What Hours are Counted for Purposes of the Measurement Methods?

For purposes of both measurement methods, the hours counted are those for which the employee is paid or entitled to payment for the performance of duties for the employer or for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence. Certain exceptions apply – for example, hours are disregarded if they are performed outside the United States and the employee receives no U.S. source income. For hourly employees, the employer must count actual hours of service. For non-hourly employees, equivalencies are permitted (e.g., credit 8 hours for each day at least one hour is worked) unless they would substantially understate the employee's hours.

For purposes of the Look-Back Measurement Method, employees who are on unpaid FMLA, USERRA or jury duty leave are credited with the hours they would have worked but for the leave (or, alternatively, their measurement period may be prorated to exclude their leave). This rule does not apply for purposes of the Monthly Measurement method.

8. Can an Employer Use Different Methods for Different Categories of Employees?

Yes, but restrictions apply. Differences in the method used to determine full-time employee status (Monthly versus Look-Back) or in how the Look-Back Method is applied (e.g., 6 month versus 12 month measurement periods) are permitted only between the following categories of employees: (a) salaried and hourly, (b) employees working in different states, (c) union and non-union employees, (d) union employees in different bargaining units, and (e) employees of different entities within a control group. Also, if an employer uses the Monthly Measurement Method for some categories of employees and the Look-Back Measurement Method for other categories of employees, complex rules apply when an employee moves between positions that are subject to different methods. Generally speaking, in this case the employee is entitled to the use of whichever method is more favorable for a limited period of time, after which point the newly applicable method will apply exclusively.26

9. What is the Impact of a Change in Status Under the Look-Back Measurement Method?

An employee's change in status during a stability period generally has no impact on his or her treatment as a full-time or non-full time employee for Play or Pay purposes during that stability period. In other words, if an employee averages 30 or more hours/week during a measurement period, he or she is "locked in" as a full-time employee for Play or Pay purposes during the entire associated stability period, even if the employee changes to a part-time position in the middle of that stability period. There is one very limited exception to this rule that applies only to employees who have continually been offered MV coverage since no later than their fourth full month of employment and who change to a position in which they are expected to and actually do work less than 30 hours/week.27

A different rule applies where an employee changes status during their initial measurement period from a Variable Hour, Part-Time or Seasonal Employee to a Full-Time Employee. In this case, the employee becomes subject to the rules for new Full-Time Employees as described in Q&A-5, above. A 4980H limited non-assessment period applies to the first three full months following the employee's change in status, provided they are offered coverage (if still employed) by no later than the first day of the following month or, if earlier, when coverage would have been offered under the initial measurement period rules had they remained applicable.28

10. What is an "Offer" of Coverage for 4980H Purposes?

Offering coverage to an employee for a particular month generally means that they had an opportunity to elect coverage for that month. For example, if an employee was offered, but did not elect, coverage for a particular coverage period, they are considered to have been offered coverage for all months during that period.29 If coverage is terminated because an employee fails to make timely payment of their share of premiums, the employee is deemed to have been offered coverage through the end of the applicable coverage period as long as the employer follows the COBRA premium payment rules (for example, doesn't cancel coverage until after a grace period extending to the last day of the month). While not expressly addressed in the regulations, it appears that an offer of COBRA continuation coverage would satisfy an employer's obligation to offer coverage under Section 4980H(a).30

A special rule applies when an employer makes contributions pursuant to a collective bargaining agreement or related participation agreement to a multiemployer health plan on an employee's behalf. In this case, as long as the multiemployer plan offers affordable MV coverage to employees who satisfy the plan's eligibility rules (and their dependents), the employer is deemed to have offered affordable MV coverage to such employees for Play or Pay purposes.

11. When Happens When an Employee is Terminated and Rehired?

It depends on the length of the employee's break in service. If an employee is rehired after an absence of more than 13 weeks, the employee is treated as a new employee upon rehire.31 In lieu of this rule, an employer may instead apply an optional "rule of parity," treating rehired employees as new employees if their period of absence is at least four weeks, and exceeds their prior period of continuous service (not to exceed 13 weeks). If an employee is treated as a continuing (rather than new) employee upon rehire, their status as full-time versus non-full-time for Play or Pay purposes is dictated by the normal rules. For example, if a "continuing" employee is rehired during a stability period during which he or she has full-time employee status (based on hours worked during the preceding measurement period), the employee's full-time employee status immediately resumes and continues for the duration of that stability period. The employee's absence will, however, impact his or her average hours worked during the measurement period that includes the absence, as the employee is credited with no hours worked during the break in service (reducing the employee's average for the measurement period).

12. How are the 4980H Penalties Assessed?

At the end of each calendar year, ALE members are required under Code 6056 to file a report with the IRS containing detailed information regarding their full-time employees (as defined for 4980H purposes) and employer-provided health coverage.32 While the IRS issued final regulations regarding these reporting requirements in March 2014, the specific information that needs to be reported won't be known until the actual IRS forms are published. However, based on the regulations and statements in the accompanying preamble, it appears that the information employers will need to report will include the name, address and SSN for each employee who was full-time for Play or Pay purposes for any month during the prior calendar year; the specific months they were full-time; whether they (and their spouse and dependents) received an offer of coverage for each month; whether they were enrolled in coverage; whether the coverage met MV and satisfied an affordability safe harbor; and if coverage wasn't offered for a particular month, the reason (for example, because the individual wasn't employed, wasn't a full-time employee, or was in a limited non-assessment period).

According to the regulations, simplified reporting will be available in certain circumstances. Under one rule, full-time employees who receive a "qualifying offer" for all 12 months during the year may be reported on using an indicator code to that effect (rather than reporting the otherwise-required detailed month-by-month information concerning the employee, as described above). A "qualifying offer" for this purpose is an offer of affordable33 MV coverage to the employee, and an offer of coverage to the employee's spouse and dependents, if applicable.34 Another rule allows an employer to report on all employees who could possibly be full-time employees for 4980H purposes without having to identify which specific employees are actually full-time. To qualify for this rule, the employer must certify that it offered affordable MV coverage to at least 98% of the employees reported on (and their dependents), regardless of whether they are full-time.35 The preamble to the regulations gives the following example of how this rule might be used: An employer has 1,000 employees who are expected to average at least 27 hours/week (and could, therefore, potentially be "full-time" for Play or Pay purposes). The employer makes an offer of affordable MV coverage to 990 of them (and their dependents). Under this simplified reporting rule, the employer is not required to report either its total number of full-time employees or whether any particular employee was full-time during a given calendar month. If an employee does qualify for Subsidized Exchange Coverage, the employer will be given an opportunity to establish that the employee in question was not full-time (and thus, should trigger no 4980H(b) Play or Pay penalty).

The information reported by the employer under Code Section 6056 will be reconciled with information reported on employees' federal tax returns, where employees will, if applicable, claim entitlement to Subsidized Exchange Coverage. While the details are still unclear, it appears than when an employee claims entitlement to Subsidized Exchange Coverage, the IRS will notify the employer of this fact and give it an opportunity to respond and make its case that this should not trigger Play or Pay penalties – for example, because the employee was offered affordable (based on an affordability safe harbor) MV coverage during the months in question. After this process has concluded, the IRS will, if applicable, calculate the employer's penalties and send a notice and demand for payment.


1 These requirements include the following: (a) the plan year in effect as of December 27, 2012 cannot have been changed to a later start date; (b) the plan must satisfy certain requirements concerning the percentage of employees or full-time employees covered or offered coverage prior to February 9, 2014; and (c) the employer must offer coverage to "substantially all" full-time employees (as described in Q&A-3 of this Bulletin) by the start of the 2015 plan year. Moreover, the transition relief is only available with respect to employees who are offered affordable and minimum value ("MV") coverage by the start of the 2015 plan year.

2 No more than 120 hours/month for any employee are counted.

3 "Seasonal workers" for purposes of this rule are defined as individuals who perform labor or services on a seasonal basis, including (but not limited to) (a) workers covered by Department of Labor regulations under the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) at 29 C.F.R. § 5000.20(s)(1), and (b) retail workers employed exclusively during holiday seasons. A reasonable, good-faith compliance standard currently applies to this definition. Importantly, the term "seasonal worker" for purposes of this rule is entirely distinct from the term "seasonal employee" used under the Look-Back Measurement Method, as described in Q&A-5.

4 Consider the following example: Companies A and B are 100% owned by the same individual and are therefore in a brother-sister control group. Company A has 40 full-time employees and offers affordable/MV coverage to all full-time employees and their dependents. Company B has 20 full-time employees and does not offer coverage to any employees. Companies A and B are aggregated to determine whether they are an ALE, and they are because together they have more than 50 full-time employees. Company A has no 4980H liability because it offers affordable/MV coverage to all full-time employees and their dependents, whereas Company B will be subject to the 4980H(a) "no offer" penalty if any full-time employee receives Subsidized Exchange Coverage. Normally, the 4980H(a) penalty would equal $2,000 x the employer's number of full-time employees minus the first 30, which would result in no penalty for Company B. However, the 30 employee reduction is allocated ratably among the control group members – in this example, Company B's share would be 10 [30 x 20/60], so that its 4980H(a) penalty would equal $20,000 [(20-10) x $2,000].

5 These conditions are: (1) the employer cannot reduce the size of its workforce in order to qualify for this transition rule, and (2) the employer cannot eliminate or materially reduce the health coverage it offered to employees as of February 9, 2014. Employers relying on this rule must submit a form to the IRS certifying that they qualify.

6 If the coverage offered does not provide MV, the relief is limited to the 4980H(a) "no offer" penalty.

7 For illustration purposes, for 2014, 400% of the mainland FPL for a family of four is $95,400. (The figure is higher for individuals living in Alaska or Hawaii.)

8 Minimum value is determined in one of three ways: (a) using a minimum value calculator produced by the IRS and HHS, (b) relying on a design-based safe harbor, or (c) obtaining an actuarial certification.

9 For purposes of the Exchange subsidy rules, the affordability test is whether the employee's premium for the lowest-cost self-only option available to the employee that provides MV does not exceed 9.5% of the employee's "household income" (basically, the employee's modified AGI plus the modified AGI of the employee's spouse and dependents, if any). However, employers are allowed to use one of three safe harbors in evaluating "affordability" for purposes of the 4980H(b) Inadequate/Unaffordable Coverage penalty, provided their coverage offers MV: (a) 9.5% of the employee's W-2 Box 1 income, (b) 9.5% of the employee's hourly wage rate, or (c) 9.5% of the applicable FPL for single individuals. See Treas. Reg. § 54.4980H-5(e)(2) for details. Therefore, it is technically possible for coverage to be considered affordable for 4980H(b) purposes (thus exempting an employer from Play or Pay penalties) even though it is considered unaffordable for Exchange Subsidy purposes (allowing the employee to qualify for Subsidized Exchange Coverage). As an example, various above-the-line tax deductions (e.g., alimony payments, IRA or HRA contributions, etc.) could result in an employee's household income being lower than his or her W-2 Box-1 income.

10 For ALEs with less than 100 full-time employees, "substantially all" means all but 5 full-time employees.

11 Coverage must continue through the end of the month that includes their 26th birthday. Step-children and foster children were included as dependents in the proposed regulations but not in the final regulations.

12 This transition rule is not available to the extent an ALE eliminated dependent coverage that was provided during the 2013 or 2014 plan year.

13 The Play or Pay rules use the term "minimum essential coverage," which is somewhat of a misnomer since it includes virtually any employer-sponsored coverage other than "excepted benefits." (Excepted benefits are limited benefits, such as stand-alone dental or vision plans or EAPs that don't provide substantial benefits in the nature of medical care, which are exempt from most health care benefit mandates under PPACA and other laws.)

14 This figure is indexed.

15 Under a transition rule in the final regulations, the "no offer" penalty is calculated by subtracting 80 (rather than the normal 30) from the ALE's full-time employee headcount through the end the 2015 plan year.

16 This figure is indexed.

17 The Monthly Measurement Method is the only available method for determining ALE status, as described in Q&A-1, above.

18 If a given month has 5 weekly periods that begin (or end) during that month, employees who work 150 hours or more during those 5 weekly periods are full-time, and if a given month has only 4 weekly periods that begin (or end) during that month, employees who work 120 hours or more during those 5 weekly periods are full-time.

19 The coverage must provide MV for a 4980H(b) limited non-assessment period to apply.

20 IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, Q&A-15, available at: http://www.irs.gov/uac/Newsroom/Questions-and-Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act.

21 The 90-day limit on the initial "administrative period" includes any period between the employee's start date and the beginning of his or her initial measurement period.

22 The coverage must provide MV for a 4980H(b) limited non-assessment period to apply.

23 The coverage must provide MV for a 4980H(b) limited non-assessment period to apply.

24 Under the Monthly Measurement Method, it is not possible to offer coverage only for those months that an employee averages at least 30 hours/week (and is therefore "full time" for Play or Pay purposes), as hours worked are not known until the end of a month, by which point it is too late to offer (or rescind) coverage for that particular month. However, if an employee who is initially hired into a full-time position has a change in employment status to a part-time position and the employer knows with certainty that the employee will not average 30 or more hours/week while in the new position, it may be possible to cancel coverage and place the employee into the initial measurement/stability period applicable to other part-time employees. Unfortunately, the regulations do not address this scenario.

25 For 2015 only, a transition rule in the regulations allows an employer with a 12-month stability period to use a 6-month measurement period in certain circumstances.

26 For details, see Treas. Reg. § 54.4980H-3(f).

27 This rule doesn't apply until the fourth full month following employee's change in status, and is only available if the employee actually averages less than 30 hours/week during each of the first three full months following the change in status. Where this exception is invoked, the Monthly Measurement Method applies through the end of the first full measurement period (and any associated administrative period) after the change in status, at which point the Look-Back Measurement Method resumes.

28 The coverage must provide MV for a 4980H(b) limited non-assessment period to apply.

29 For employers using the Look-Back Measurement method, the regulations specifically provide that if an employee loses and then regains eligibility during a stability period (for example, because of a termination of employment and rehire), they do not have to be given another chance to enroll in coverage if they previously declined.

30 However, COBRA coverage will generally not be affordable under one of the three affordability safe harbors.

31 This rule also applies when an employee returns to work following a period during which the employment relationship remains intact but the employee works no hours of service (for example, an unpaid leave of absence). However, the regulations only address what happens when the employee returns to work following the absence, and indicate that an employee who is "full-time" during a stability period will retain that status for the duration of the stability period even if unpaid absence exceeds 13 weeks. Note that different rules apply to educational organizations – see Treas. Reg. § 54.4980H-3(d)(6).

32 Separate reporting requirements apply under Code Section 6055 for employers that sponsor self-insured health plans; however, the IRS has announced that a single form may be used to satisfy both reporting requirements.

33 For this purpose, affordability is based on 9.5% of the mainland single individual FPL.

34 For employees who receive a qualifying offer for less than 12 months during the year (for example, because they were only employed or only full-time employees for certain months or were in a limited non-assessment period for certain months), a modified version of this rule applies that requires reporting the standard information for the months the employee didn't receiving a qualifying offer. However, for 2015, this rule is relaxed if the employer certifies that it made a qualifying offer to at least 95% of its full-time employees.

35 The employer must ensure that any employees who could possibly have been full-time for Play or Pay purposes for any month during the prior year are reported on, because failure to do so could trigger penalties (as the employer would be in violation of the requirement that it report on all full-time employees).