KEY BENEFIT ADMINISTRATORS Understanding and Applying the Emplyer Shared Respnsibility Requirements
Understanding and Applying the Emplyer Shared Respnsibility Requirements Key Benefit Administratrs Nvember 11, 2014 ABOUT THIS MANUAL Cautin: Nthing cntained in this instructin manual is r shuld be cnstrued as legal advice fr specific cases, and readers are respnsible fr btaining such advice frm their wn legal cunsel. This manual is intended fr educatinal and infrmatinal purpses nly.
TABLE OF CONTENTS Intrductin... 2 Step #1: The Applicable Large Emplyer Determinatin... 4 Step 2: Identifying Qualifying Full-Time Emplyees... 8 Step #3. Determine if excise taxes will be wed... 21 Appendix A: Hurs f Service Rules... 26 Appendix B: Cmmn Law Emplyee Factrs... 31 Appendix C: Lk Back Measurement Perid and Mnthly Measurement Perid Methds... 33 Appendix D: Special Unpaid Leave Rules... 41 Appendix E: Transitin Relief fr Fiscal Year Plans... 42 Appendix F: Eligible Emplyer Spnsred Plan (Minimum Essential Cverage)... 46 Appendix G: Electrnic Enrllment Rules... 54 Appendix H: Affrdability Safe Harbrs... 55 Appendix I: Minimum Value... 57 Appendix J: Tax Examples... 58 Appendix K: Cde Sectin 6055 and 6056 Reprting Requirements... 60 Appendix L: Overview f Transitin Rules... 67 Appendix M: Summary f Ntice 2014-49... 71 i
NOTE: CERTAIN TERMS ARE CAPITLIZED THROUGHOUT THIS MANUAL. THOSE CAPITALIZED TERMS REFLECT KEY TERMS UNDER THE 4980H RULES AND YOU SHOULD PAY SPECIAL ATTENTION TO THEM. EACH CAPITALIZED TERM IS SPECIFICALLY DEFINED IN THIS MANUAL. 1
Intrductin Effective January 1, 2015, each emplyer wh is an applicable large emplyer ( ALE ) with 100 r mre Full-time Equivalents becmes subject t the emplyer shared respnsibility requirements prescribed in Internal Revenue Cde Sectin 4980H ( 4980H Rules ). Under the 4980H Rules, ALEs wh fail t ffer a Qualifying Full-Time Emplyee Qualifying Cverage fr a mnth will be subject t ne f tw excise taxes if that Qualifying Full-time Emplyee als receives a premium subsidy r tax credit with respect t cverage purchased in the Marketplace ( Premium Subsidy ). Qualifying Cverage is the level f cverage required t be ffered t avid the specific excise tax. See Step #3 fr a mre detailed descriptin f the type f cverage that qualifies as Qualifying Cverage fr each excise tax. Key Pint: The 4980H Rules delay the effective date f the excise taxes fr ALEs with at least 50 but less than 100 Full-time Equivalents s lng as the emplyer satisfies certain ther requirements, such as nt reducing the wrkfrce after February 9, 2014 slely t avid the 4980H Rules. See Appendix L fr a mre detailed discussin f this transitin relief fr small ALEs. BUT EVEN IF THIS DELAY UNTIL 2016 APPLIES TO YOU, YOU MUST STILL SATISFY THE REPORTING REQUIREMENTS UNDER CODE SECTION 6056 FOR 2015. Applying the 4980H Rules t each emplyer is a three step prcess each f which is detailed in a separate, mre detailed sectin f this manual. Step #1: Determine whether the emplyer is an ALE. The 4980H rules nly apply t ALEs. Generally, an ALE is any emplyer r any cmbinatin f emplyers wh are members f the same cntrlled grup wh, in the aggregate, emplyed n average 50 r mre Full-time Equivalents during the preceding calendar year (althugh transitin relief is available fr the 2015 year that allws emplyers t use 6 mnths during 2014 t determine ALE status). Full- Time Equivalents include bth Full-Time Emplyees (i.e. emplyees wh average 30 Hurs f Service per week in a mnth) and Full-Time Equivalencies (See Step #2 f this manual fr a mre detailed definitin f Full-time Equivalencies ). Step #2: If the emplyer is an ALE, then each ALE Member (i.e. each emplyer wh is a member f the cntrlled grup f emplyers) must identify Qualifying Full-time Emplyees. The 4980H Rules impse ne f tw excise taxes n ALE Members wh fail t ffer Qualifying Cverage t Qualifying Full-time Emplyees fr a mnth if the Qualifying Full-time Emplyee receives a Premium Subsidy. The 4980H rules identify tw different methds frm which an ALE Member can chse t identify Qualifying Full-time Emplyees fr a mnth: the Lk Back Measurement Methd and the Mnthly Measurement Perid Methd. Since cmpliance with 4980H is determined fr each mnth f the calendar year, ALE Members wh wish t avid excise taxes must ensure that Qualifying Cverage is ffered each mnth t emplyees wh are Qualifying Full-time Emplyees fr that mnth. The IRS has prvided tw different methds fr identifying emplyees wh are Qualifying Full-time Emplyees fr a mnth: the Lk Back 2
Measurement Perid and the Mnthly Measurement Perids. These are discussed in mre detail in the Step #2 Sectin f this manual. Step #3: Determine if ALE Member will we excise taxes based n existing ffers f cverage. An ALE Member can cntrl its excise tax destiny and avid excise taxes under 4980H fr a mnth nly if the emplyer ffers cverage thrugh an Eligible Emplyer Spnsred Plan that is Affrdable and prvides Minimum Value t 100% f the emplyer s emplyees wh are Qualifying Full-Time Emplyees (and their dependent children) each mnth. If, hwever, the ALE Member des nt satisfy this 100% threshld in a mnth, the ALE Member culd be subject t an excise tax under the 4980H Rules fr that mnth if a Qualifying Full-Time Emplyee receives a Premium Subsidy in the Marketplace that mnth. If yu d nt satisfy the 100% threshld in a mnth, and a Qualifying Full-time Emplyee receives a Premium Subsidy fr that mnth, the nly questin then is which f the tw excise taxes impsed under the 4980H Rules will apply. Mre detail regarding the excise tax determinatin under the 4980H Rules is prvided in Step #3 f this manual. Mving Frward Befre we mve headlng int each Step f the analysis, we want t identify the Key terms yu must understand in rder t prperly apply the Emplyer Shared Respnsibility Rules. Each f the fllwing terms is a Key Term and each is defined in this Manual. Applicable large emplyer r ALE ALE Member Full-Time Emplyee Qualifying Full-time Emplyee Hurs f Service Seasnal Emplyee Seasnal Wrker Variable Hur Emplyee Part-time Emplyee Nn-Variable Emplyee Initial Measurement Perid Standard Measurement Perid Minimum essential cverage Eligible Emplyer Spnsred Plan Affrdability r Affrdable Cverage Minimum value (nt the same cncept as minimum essential cverage ) Qualifying Cverage Sledgehammer Tax (als referred t as 4980H(a) Penalty) Tackhammer Tax (als referred t as the 4980H(b) penalty) Premium Subsidy 3
Step #1: The Applicable Large Emplyer Determinatin Overview Only applicable large emplyers ( ALEs ) are subject t 4980H The ALE determinatin is based n IRS cntrlled grup rules. The ALE determinatin is based n Full-time Equivalents, which is the sum f bth Full-Time Emplyees and Full-Time Equivalencies, determined in accrdance with 4980H. Emplyers wh exceed 50 Full-time Equivalents fr n mre than 4 mnths/120 days during the year slely because f Seasnal Wrkers d nt qualify as ALEs. Emplyers may use any six cnsecutive mnth perid in 2014 t determine ALE status fr 2015. If there is n questin that emplyer is an ALE, then skip this step and prceed immediately t Step #2. A. Wh is an ALE? An ALE is defined generally in Sectin 4980H(c) as any emplyer (private, gvernmental and tax exempt entity) wh emplyed, n average, at least 50 Full-time Equivalents (the sum f Full-Time Emplyees and Full-time Equivalencies) n business days during the prir calendar year (withut regard t any plan year f a plan spnsred by the emplyer). Key Pint: Fr 2015, emplyers may use ANY 6 cnsecutive perid in 2014 t determine ALE status. B. Hw d yu determine whether an emplyer is an ALE? Emplyers shuld apply the fllwing principles and rules when making an ALE determinatin: ALE determinatin is based n cntrlled grup rules. The cntrlled grup rules in the Cde are cmplex and the emplyer shuld analyze these rules nly with assistance f qualified legal cunsel. Nevertheless, it is imprtant t understand the fundamentals. There are three main types f cntrlled grups: parent/subsidiary, brther/sister, and affiliated service grup. A Parent/Subsidiary cntrlled grup cnsists f a parent crpratin and ne r mre subsidiary crpratins. A Parent/Subsidiary cntrlled grup exists if the members f the grup (ther than the cmmn parent) are at least 80 percent wned by ther members f the grup, and if the cmmn parent wns at least 80 percent f at least ne f the member crpratins. Brther/Sister cntrlled grups f emplyers exist where five r fewer sharehlders cntrl the crpratins. Fr this purpse, cntrl is defined as: (i) wnership f at least 80 percent f the entity, in the aggregate and (ii) wnership f mre than 50 percent f the entity, taking int accunt the stck wnership f each such persn nly t the extent that such stck wnership is identical with respect t each such crpratin. 4
An affiliated service grup is defined generally as a service rganizatin that regularly perfrms services in certain prfessinal fields, such as health, law, engineering, fr the first service rganizatin and is generally a sharehlder r partner in the first service rganizatin (althugh there is a limited situatin in which the service rganizatin des nt have t be a sharehlder-see Cde Sectin 414(m)(5)). Key Pint: The 4980H Rules prvide virtually n guidance regarding applicatin f the cntrlled grup rules t gvernmental emplyers. Until subsequent guidance is issued, gvernmental emplyers may apply a reasnable gd faith interpretatin f the cntrlled grup rules t determine ALE status. Identify Full-Time Emplyees during each mnth f the prir calendar year. A Full-Time Emplyee is any cmmn law emplyee f the emplyer wh is emplyed 30 Hurs f Service r mre n average each week during a mnth in the prir calendar year. This determinatin is made cnsistent with the fllwing fundamental rules: Full-time status fr purpses f the ALE Determinatin is based n the actual Hurs f Service in the preceding calendar year. Key Pint: Althugh nt clear, IRS fficials have infrmally clarified recently that the mnthly equivalency test used t identify full-time emplyees fr purpses f cmpliance with the 4980H rules des NOT apply t the ALE determinatin. The IRS fficial infrmally indicated that yu wuld use 120 hurs f service t identify full-time emplyees fr purpses f the ALE determinatin (despite the fact that sme mnths might have mre than 4 weeks). Emplyers d nt use the Lk Back Measurement Perid t determine ALE status. The IRS has prescribed specific Hurs f Service rules. See appendix A fr a summary f the specific Hurs f Service rules prescribed by the IRS. Only cmmn law emplyees are cnsidered fr purpses f determining which emplyees qualify as Full-time Equivalents. The IRS utilizes a 20-factr cmmn law emplyee test t determine whether an individual is a cmmn law emplyee f an emplyer. See Appendix B fr an verview f the IRS 20 factr cmmn law emplyee test. Partners in a partnership and mre than 2% sharehlders in a subchapter S are nt cnsidered cmmn law emplyees. Leased emplyees as defined in Cde Sectin 414(n) are nt cnsidered cmmn law emplyees f the recipient rganizatin fr purpses f the 4980H rules even thugh such individuals are treated as emplyees f the recipient rganizatin fr ther purpses in the Internal Revenue Cde (e.g. benefit plan nndiscriminatin testing). Key Pint: The final regulatins address the applicatin f the 4980H rules t special categries r types 5
f emplyees, such as bna fide vlunteers, n-call emplyees, staffing agency emplyees, and thers. See Appendix A fr a mre detailed discussin f these special categries f emplyees. Determine Full-Time Equivalencies each mnth in the prir calendar year. The emplyer must als cunt Full-Time Equivalencies f the cntrlled grup emplyer in additin t Full-Time Emplyees. The number f Full-Time Equivalencies is equal t the ttal Hurs f Service in a mnth fr cmmn law emplyees wh are NOT Full-Time Emplyees (nt t exceed 120 fr each such emplyee) divided by 120. The number f Full-Time Equivalencies each mnth is added t the number f Full- Time Emplyees t determine applicable large emplyer status. Determine ALE status. The applicable large emplyer determinatin is based n the fllwing frmula: a. Determine the ttal number f Full-Time Emplyees during each mnth f the prir calendar year b. Determine the Full-Time Equivalency amunt each mnth c. Determine the sum f (a) and (b) d. Divide c. by 12 If d. is > 50, then the emplyer is an applicable large emplyer Yu must als cnsider the fllwing fundamental rules when making yur determinatin: Fractins fr a mnth are cnsidered in the calculatin; hwever, fractins are runded dwn t the nearest 100 th. Fr example, if the ttal number f Full-Time Equivalencies fr a mnth is 30.544, yu may rund dwn t 30.54. Once the calculatin is made fr the year, fractins in the final number are runded DOWN t the nearest whle number. Fr example, an emplyer with 49.8 Full-Time Emplyees/equivalencies is treated as having 49 Full-Time Emplyees. Special rule fr Emplyers wh exceed 50 Full-time Equivalents due t Seasnal Wrkers. There is a special rule regarding emplyees wh qualify as Seasnal Wrkers. Under the special rule, if the emplyer exceeds (r, if in the first year f existence, the emplyer reasnably expects that it will exceed) 50 emplyees fr fur calendar mnths (r 120 days) r less, nt necessarily cnsecutive, and the excess ver 50 fr thse fur mnths (r 120 days) are Seasnal Wrkers, then the emplyer is nt an ALE. A Seasnal wrker is generally defined as an emplyee wh perfrms services n a seasnal basis, as defined by the Secretary f Labr, including but nt limited t emplyees cvered by 29 C.F.R. 500.20(s)(1) and retail wrkers emplyed exclusively during hliday seasns. The final regulatins indicate that emplyers may apply a gd faith reasnable interpretatin f the term Seasnal Wrker as well as 29 C.F.R. 500.20(s)(1), including as applied by analgy t wrkers and emplyment psitins similar t thse described in 29 C.F.R. 500.20(s)(1). Key Pint: Dn t cnfuse Seasnal Wrker with Seasnal Emplyee; these terms are different and have different applicatins. Seasnal Wrker is a term related slely t the ALE determinatin and Seasnal 6
Emplyee is a term related t the lk back Measurement Perid used t identify Full-Time Emplyees fr purpse f cmpliance with 4980H. The term Seasnal Wrker appears t be narrwer in scpe than Seasnal Emplyee (as defined in the final regulatins) with respect t the type f emplyee that culd qualify as seasnal; hwever, a Seasnal Wrker s seasnal emplyment culd be lnger than a Seasnal Emplyee s emplyment. Fr a mre detailed discussin regarding Seasnal Emplyees, see Step 3 f this manual. If, after perfrming the analysis abve, yu have determined that the emplyer is NOT an ALE, the 4980H Rules d nt apply t the emplyer. If, hwever, the emplyer is an ALE, prceed t Step #2. 7
Step #2: Identifying Qualifying Full-Time Emplyees Overview Each ALE Member is independently respnsible fr identifying its Qualifying Full-Time Emplyees (as defined by 4980H) fr purpses f reprting and assessment f excise taxes (if any). The Full-Time Emplyee determinatin is based n specific Hurs f Service rules, which includes certain paid leaves f absence defined in 29 C.F.R. 2530.200b-2(a). See Appendix A fr a mre detailed verview f the Hurs f Service rules. ALE Members may be subject t an excise tax under 4980H fr a mnth if Qualifying Cverage is nt ffered t a Qualifying Full-time Emplyee during a mnth in which the Qualifying Fulltime Emplyee receives a Premium Subsidy in the Marketplace. The 4980H Rules identify tw methds fr identifying Qualifying Full-Time Emplyees: the Lk Back Measurement Perid Methd and the Mnthly Measurement Perid Methd (cllectively, the Full-time Emplyee Determinatin Methd). Generally, the ALE Member must apply the same Full-Time Emplyee Determinatin Methd t every emplyee within ne f the distinguishable classes (e.g. salaried r hurly). The applicatin f the Lk Back Measurement Perid Methd will vary depending n whether the emplyee is a new emplyee r an Onging Emplyee. An ALE Member may be subject t excise taxes under 4980H fr each mnth that the ALE Member fails t ffer qualifying cverage t a Qualifying Full-Time Emplyee if that Qualifying Full-Time Emplyee als receives a Premium Subsidy in the Marketplace. Thus, each ALE Member must identify Qualifying Full-time Emplyees each mnth. The IRS has identified tw methds fr identifying Qualifying Full- Time Emplyees: the Lk Back Measurement Perid Methd and the Mnthly Measurement Perid Methd. A. General Rules fr Identifying Qualifying Full-time Emplyees Bth methds fr identifying full-time emplyees are subject t the fllwing fundamental principles: 1. Qualifying Full-Time Emplyee: Generally, a Qualifying Full-time Emplyee is an ALE Member s cmmn law emplyee with respect t whm the failure t ffer Qualifying Cverage in a mnth culd trigger excise taxes fr the ALE Member if that emplyee receives a Premium Subsidy. An emplyee will be a Qualifying Full-time Emplyee in the fllwing situatins (depending the n specific methd adpted by the ALE Member): Lk Back Measurement Perid Methd If a new emplyee t whm the Initial Measurement Perid applies (as described belw) averages 130 Hurs f Service r mre each mnth during that Initial Measurement Perid, then the emplyee will be a Qualifying Emplyee during each mnth f the Stability Perid that fllws, regardless f the emplyee s Hurs f Service during that Stability Perid. 8
Practice Pinter-Are ALE Members subject t excise taxes during the Initial Measurement Perid? Generally, the answer is n. Hwever, the Initial Measurement Perid fr an emplyee wh becmes a Qualifying Full-time Emplyee is a Limited Nn-Assessment Perid. Cnsequently, excise taxes culd apply fr each mnth during the Initial Measurement Perid that the Qualifying Full-time Emplyee had 130 Hurs f Service r mre IF cverage thrugh an Eligible Emplyer Spnsred Plan that prvides minimum value is NOT ffered t the Qualifying Full-time Emplyee by the first day f the applicable Stability Perid. Fr emplyees t whm the Initial Measurement Perid des NOT apply (e.g. Nn- Variable Emplyees), the emplyee is a Qualifying Full-time Emplyee every mnth that the emplyee has 130 Hurs f Service; hwever, n excise taxes will apply in certain mnths that Qualifying Cverage is nt ffered t the extent that such mnths are part f a Limited Nn-Assessment Perid. All Onging Emplyees (as described belw) wh average 130 Hurs f Service r mre per mnth during the Standard Measurement Perid will be a Qualifying Emplyee during each mnth f the fllwing Stability Perid. Unlike the Initial Measurement Perid fr new emplyees, the Standard Measurement Perid is NOT a Limited Nn-Assessment Perid. Mnthly Measurement Perid All emplyees wh have 130 Hurs f Service r mre (unless the Weekly Methd described belw is used); hwever, n excise taxes will apply in certain mnths that Qualifying Cverage is nt ffered t the extent that such mnths are part f a Limited Nn-Assessment Perid. 2. Hurs f Service: 4980H prescribes specific Hurs f Service rules. Generally, an hur f service includes any perids fr which the emplyee is paid r entitled t payment fr services perfrmed as well as certain perids during which the emplyee is paid r entitled t payment even thugh the emplyee is nt perfrming services. Fr mre details n the Hurs f Service rules, see Appendix A. 3. Cmmn Law Emplyee: All cmmn law emplyees f the emplyer are cnsidered when yu identify Qualifying Full-Time Emplyees. The IRS has prescribed a 20-factr cmmn law emplyee test. Fr mre details n the cmmn law emplyee test, see Appendix B. NOTE: The manner in which an ALE Member classifies an emplyee isnt relevant t the 4980H rules (except in the case f seasnal emplyees). The cmmn law analysis fcuses n wh has the right t cntrl the manner in which services are perfrmed, regardless f whether that right is exercised r nt nt the manner in which the emplyee is classified by the emplyer. In additin, Seasnal Emplyees must als be cnsidered in the analysis if they are cmmn law emplyees f the ALE Member; hwever, a special rule applies t Seasnal Emplyees. Once the ALE Member understands these fundamental terms and cncepts, the ALE Member must then decide which methd is best under the circumstances. Practice Pinter: The final regulatins clarify the applicatin f the 4980H Rules t a number f special 9
emplyees, such as: Bna fide vlunteers Certain clergy Students Interns Adjunct prfessrs On call emplyees See Appendix A fr a mre detailed discussin regarding these special emplyees. B. The Lk Back Measurement Perid Methd-General Operating Principles The Lk Back Measurement Perid Methd generally perates accrding t the fllwing, fundamental principles: ALE Members will establish an Initial Measurement Perid fr new emplyees during which the Hurs f Service f a new Variable Hur, Seasnal Emplyee, r Part-Time Emplyee are measured ver that Initial Measurement Perid. Nn-Variable Emplyees (as defined herein) will be subject t the Mnthly Measurement Perid Methd until the Stability Perid fllwing the Standard Measurement Perid. The emplyer will als establish a Standard Measurement Perid fr Onging Emplyees during which each Onging Emplyee s aggregate Hurs f Service are cllected. Practice Pinter: ALE Members wh adpt the Lk Back Measurement Perid Methd must establish prcedures fr new emplyees and prcedures fr Onging Emplyees. During an Administrative Perid that fllws the applicable Measurement Perid, the ALE Member will identify the emplyees that averaged 130 Hurs f Service r mre per mnth during the applicable Measurement Perid. Each emplyee wh averaged 130 Hurs f Service r mre per mnth during the applicable Measurement Perid will be a Qualifying Full-time Emplyee during each mnth f the fllwing Stability Perid. The manner in which the Lk Back Measurement Perid Methd is applied differs slightly depending n whether the emplyee is a new emplyee r an Onging Emplyee. Onging Emplyees are defined as emplyees wh have been emplyed fr ne entire Standard Measurement Perid and fllwing Administrative Perid, which is the static Measurement Perid chsen by the ALE Member t measure the Hurs f Service fr existing emplyees. Practice Pinter: All emplyees in a distinguishable class t which the ALE Member applies the Lk 10
Back Measurement Perid are subject t a Standard Measurement Perid. The Variable and Nn- Variable distinctin applicable t new emplyees des NOT apply t Onging Emplyees. There are fur types f new emplyees (i.e. emplyees wh are nt Onging Emplyees): Nn- Variable, Variable, Part-time and Seasnal Emplyees. The Lk Back Measurement Perid Methd is applied differently t Variable/Part-time/Seasnal Emplyees than it is t Nn- Variable Emplyees. The fllwing prvides a radmap fr implementing the Lk Back Measurement Perid Methd fr bth Onging Emplyees and new emplyees. We begin with Onging Emplyees. C. Applicatin f the Lk Back Measurement Perid Methd t Onging Emplyees As nted abve, an Onging Emplyee is an emplyee wh is emplyed by the emplyer fr an entire Standard Measurement Perid. The fllwing summarizes the applicatin f the Lk Back Measurement Perid Methd t Onging Emplyees: Establish the Standard Measurement Perid. The Standard Measurement Perid is subject t the fllwing requirements: Duratin f Standard Measurement Perid. The Standard Measurement Perid must be n less than three mnths and generally n mre than 12 mnths. See Additinal Cnsideratins belw fr a mre detailed discussin regarding additinal factrs t cnsider when establishing the Standard Measurement Perid. Payrll Perid: Fr payrll perids that are ne week, tw weeks r semi-mnthly in duratin, an emplyer is permitted t treat as a Standard Measurement Perid a perid that ends n the last f the payrll perid preceding the payrll perid that includes the date that wuld therwise be the last day f the Standard Measurement Perid s lng as the first day f the Standard Measurement Perid begins n the first day f the payrll perid that includes the date that wuld therwise be the first day f the Standard Measurement Perid. Likewise, an ALE Member may treat as a Standard Measurement Perid a perid that begins n the first day f the payrll perid that includes the date that wuld therwise be the first day f the Standard Measurement Perid s lng as the Standard Measurement Perid ends n the last f the payrll perid that includes the date that wuld therwise be the last day f the Measurement Perid. Identify Breaks in Service. An emplyee wh has a perid during which the emplyee has n Hurs f Service fr 13 full weeks (26 full weeks fr emplyees f an Educatinal Organizatin ) r lnger is treated as having a Break in Service. Thus, an emplyee wh resumes Hurs f Service after 13/26 full weeks is cnsidered a new emplyee whereas an emplyee wh resumes Hurs f Service after less than 13/26 full weeks is cnsidered a Cntinuus Emplyee fr purpses f the 4980H Rules. There is als a rule f parity that 11
treats as a Break in Service as any perid with n Hurs f Service that is at least fur weeks in duratin and greater than the prir perid f emplyment (determined after applying the special rule fr Special Unpaid Leaves and Emplyment Breaks). See Appendix C fr examples that illustrate the applicatin f the Break in Service rules. Averaging Rules fr Special Unpaid Leaves and Emplyment Breaks. There are special averaging rules fr Cntinus Emplyees wh take an unpaid leave f absence that is a Special Unpaid Leave r wh experience an Emplyment Break (if the emplyer is an Educatinal Organizatin). See Appendix D fr a mre detailed verview f the special fr Special Unpaid Leaves and Emplyment Breaks. Different Standard Measurement Perids may apply t each distinguishable class f emplyees. ALE Members may vary the Standard Measurement Perid fr each f the fllwing distinguishable classes f emplyees: Emplyees subject t a cllectively bargained agreement and emplyees nt subject t a cllectively bargained agreement Each grup f cllectively bargained emplyees cvered by a different cllectively bargained agreement Salaried Hurly emplyees Emplyees lcated in different states Practice Pinter: Can the ALE Member apply the Lk Back Measurement Perid Methd t sme but nt all Onging Emplyees in the same distinguishable class? NO!!!!! Impact f emplyment status change. A change in psitins during a Standard Measurement Perid generally has n impact n the applicatin f the Standard Measurement Perid t that emplyee. See Appendix C fr examples n applying the lk back Measurement Perid t emplyees. Establish a Stability Perid fr Qualifying Full-Time Emplyees. The emplyer must establish a Stability Perid fllwing the Standard Measurement Perid (and any assciated administrative perid). The Stability Perid fr emplyees wh averaged 30 Hurs f Service r mre per week ver the Standard Measurement Perid is subject t the fllwing fundamental requirements: Status during Stability Perid. The emplyee is a Qualifying Full-time Emplyee fr each mnth f the Stability Perid (r until the emplyee s emplyment is terminated, whichever is earlier) regardless f the actual Hurs f Service during such mnth. If the emplyee takes an unpaid leave f absence, the Qualifying Full-time Emplyee must remain eligible fr Qualifying Cverage during the unpaid leave f absence t the extent emplyed by the emplyer. If, hwever, the Qualifying Full-time Emplyee terminates emplyment, cverage may be terminated withut risk f excise taxes under the 4980H Rules. If the Qualifying Full-time Emplyee resumes Hurs f Services as a Cntinuus 12
Emplyee, the Qualifying Full-time Emplyee must be ffered cverage (t the extent previusly elected and then lst during the perid with n Hurs f Service) n later than the 1 st day f the mnth fllwing the date Hurs f Service resume. If the Qualifying Full-time Emplyee resumes Hurs f Service after experiencing a Break in Service (as defined abve), then the ALE Member may treat the emplyee as a new emplyee upn resumptin f Hurs f Service. See Appendix C fr examples that illustrate this rule. Duratin f Stability Perid fr Qualifying Full-Time Emplyees. The Stability Perid fllwing the Standard Measurement Perid fr Qualifying Full-time Emplyees must be at least six mnths in duratin, and n shrter in duratin than the Standard Measurement Perid and it must begin immediately fllwing the Standard Measurement Perid and any applicable Administrative Perid. See Additinal Cnsideratins belw fr a mre detailed discussin n the duratin f the Stability Perid. Establish a Stability Perid fr emplyees wh d nt have the requisite Hurs f Service during the Standard Measurement Perid t be a Qualifying Full-time Emplyee. The Stability Perid fr emplyees wh d nt have the requisite Hurs f Service ver the Standard Measurement Perid is subject t the fllwing requirement: Duratin f Stability Perid fr emplyees wh are NOT Qualifying Full-time Emplyees. The Stability Perid fr such an emplyee cannt be lnger than the Standard Measurement Perid (even if the Standard Measurement Perid is less than six mnths). Status during Stability Perid. If an emplyee des nt average the requisite Hurs f Service during the applicable Measurement Perid, then he r she is nt a Qualifying Full-time Emplyee during each mnth f the fllwing Stability Perid (i.e., there is n penalty fr failing t ffer cverage during that Stability Perid) regardless f the emplyee s actual Hurs f Service during that Stability Perid. Establish an Administrative Perid. The Administrative Perid is the perid during which emplyees are identified as full-time r nt based n their Hurs f Service during the preceding Measurement Perid and, if identified as full-time, ffered the pprtunity t enrll. The administrative perid fllwing the Standard Measurement Perid may nt exceed 90 calendar days. Additinal Cnsideratins. In light f the abve mentined fundamental rules, ALE Members shuld cnsider the fllwing factrs in establishing their safe harbr and Measurement Perids: Equal measurement and Stability Perids. ALE Members shuld cnsider establishing a Standard Measurement Perid that is the same duratin as the Stability Perid and that ends near the start f the annual enrllment perid fr the health plan. Since the Stability Perid fr emplyees wh are NOT full-time must be n shrter in duratin than the Standard Measurement Perid, an emplyer wh implements a Measurement Perid that is shrter in duratin than the Stability Perid will have t implement tw sets f rules 13
ne fr emplyees wh are cnsidered t be full-time and anther fr emplyees wh are nt cnsidered t be full-time. Transitin relief fr 2015: Ntwithstanding the general rule abve, ALE Members may establish a Standard Measurement Perid in 2014 that is at least 6 mnths in duratin and a 12 mnth Stability Perid fr all Onging Emplyees (including nn-full-time) beginning in 2015 s lng as the Standard Measurement Perid begins n later than July 1, 2014. See Appendix C fr an illustratin f lk back measurement methd fr Onging Emplyees, including the impact f cafeteria plan rules n emplyee s electins fr a Stability Perid. D. Applicatin f the Lk Back Measurement Perid Methd t New Emplyees The applicatin f the Lk Back Measurement Perid Methd t new emplyees differs slightly than the applicatin f the Lk Back Measurement Perid rules t Onging Emplyees. The fllwing describes the fundamental requirements f the Lk Back Measurement Perid methd as applied t new emplyees: Determine which f the fur buckets the emplyee fits based n the applicable facts and circumstances n the date f hire: The 4980H Rules identify fur different types (r buckets ) f new emplyees, each f which is described belw. The rules vary depending n which bucket the emplyee fits. Thus, each ALE Member must determine which bucket a new emplyee fits in rder t knw the specific rule t apply. Nn-variable full-time. A Nn-Variable Hur new emplyee is an emplyee fr whm it can be determined by the ALE Member n the start date that the emplyee is reasnably expected t average 30 Hurs f Service r mre per week during each mnth emplyed, regardless f the duratin f emplyment. The determinatin whether an emplyee is a Nn-Variable Emplyee (r nt) is reasnable is based n the facts and circumstances that exist at the time f emplyment. The final regulatins prvide an inclusive list f factrs, such as: Whether the emplyee is replacing an emplyee wh is r was full-time; The extent t which Hurs f Service fr Onging Emplyees in cmparable psitins vary abve r belw the 30 Hurs f Service threshld during recent Measurement Perids; Whether the jb was advertised as full-time r nt. N single factr is determinative. The duratin f emplyment is nt a factr. Thus, if the ALE Member nly expects the emplyee t be emplyed fr 5 mnths, but the ALE Member reasnably expects the emplyee t average 30 Hurs f Service per week during thse 5 mnths, the emplyee is generally nn-variable. 14
Practice Pinter: AN EMPLOYEE WHO QUALIFIES AS A SEASONAL EMPLOYEE IS NOT CONSIDERED A NON-VARIABLE EMPLOYEE, even if the ALE Member determines at the start date that the emplyee is reasnably expected t average 30 Hurs f Service per week during each mnth the emplyee is emplyed. The 4980H Rules allw ALE Members wh use the Lk Back Measurement Perid Methd t treat emplyees wh qualify as Seasnal Emplyees the same as a Variable Emplyee. See belw fr mre details n wh qualifies as a Seasnal Emplyee. Variable Emplyee: An emplyee is a Variable Emplyee if, at the start date, the ALE Member cannt make a determinatin that the emplyee is reasnably expected t average 30 Hurs f Service each mnth emplyed because the emplyee s hurs will vary r are therwise uncertain. The ALE Member wuld use the same factrs described abve with respect t nn-variable t determine whether the emplyee was variable r nn-variable. Seasnal Emplyees: Emplyees that qualify as Seasnal Emplyees are treated as Variable Emplyees fr purpse f the lk back Measurement Perid, even if the ALE Member can make a determinatin n the hire date that the emplyee is reasnably expected t average 30 Hurs f Service r mre per week fr each mnth emplyed during the Initial Measurement Perid. An emplyee qualifies as a Seasnal Emplyee if the fllwing requirements are satisfied: (i) the emplyee is hired int a psitin fr which the custmary emplyment is 6 mnths r less (althugh it can be lnger under unusual circumstances) and (ii) the perid f emplyment custmarily begins during the same date each calendar year. See Appendix C fr a mre detailed applicatin f the special Seasnal Emplyee rule. Part-time emplyee. A Part-Time Emplyee is an emplyee fr whm the ALE Member can make a determinatin n the start date that the emplyee is nt reasnably expected t average 30 Hurs f Service fr each mnth emplyed during the Standard Measurement Perid. During an Initial Measurement Perid, Part-Time Emplyees are subject t the same rules as variable emplyees. Apply the Mnthly Measurement Perid Methd t Nn-Variable Emplyees. Unlike variable/seasnal/part-time Emplyees, ALE Members will apply the Mnthly Measurement Perid Methd apprach t a Nn-Variable Emplyee until the start f the Stability Perid fllwing the first Standard Measurement Perid fr that emplyee. Whether a nn-variable emplyee is a Qualifying Full-time Emplyee each mnth depends n the emplyee s Hurs f Service fr thse mnths and whether the mnth is part f a Limited Nn-Assessment Perid. The fllwing Limited Nn-Assessment Perids apply t a Nn-Variable Emplyee: (i) the first partial mnth f emplyment; (ii) any f the first three full-calendar mnths fllwing the date f hire prvided that (A) the emplyee is therwise eligible fr cverage under a plan and is nt ffered cverage during any such mnth due slely t a waiting perid (ii) cverage prviding minimum value is ffered t the Qualifying Full-time Emplyee (if still emplyed) by n later than the 1 st day f the 4 th full calendar mnth fllwing the emplyee s start date. 15
Establish an Initial Measurement Perid fr new Variable, Seasnal, and Part-Time Emplyees: If an emplyee is a Variable, Seasnal, r Part-time Emplyee (as defined abve), the ALE Member may apply an Initial Measurement Perid t determine if the emplyee is a Qualifying Full-time Emplyee fr the fllwing Stability Perid. Duratin f Initial Measurement Perid. The Initial Measurement Perid must be n less than three mnths and generally n mre than 12 mnths. It may begin n the date f hire r the first day f the mnth fllwing the date f hire; hwever, any delay in the Initial Measurement Perid must be factred int the duratin f the Administrative Perid (which cannt exceed 90 calendar days in the aggregate). Als, the duratin f the Initial Measurement Perid is impacted directly by the desired duratin f the Administrative Perid. See Additinal Cnsideratins belw fr a mre detailed discussin n establishing the Initial Measurement Perid. Payrll perids: Fr payrll perids that are ne week, tw weeks r semimnthly in duratin, an emplyer is permitted t treat as an Initial Measurement Perid a perid that ends n the last f the payrll perid preceding the payrll perid that includes the date that wuld therwise be the last day f the Initial Measurement Perid s lng as the first day f the Initial Measurement Perid beings n the first day f the payrll perid that includes the date that wuld therwise be the first day f the Initial Measurement Perid. Likewise, an ALE Member may treat as an Initial Measurement Perid a perid that begins n the first day f the payrll perid that includes the date that wuld therwise be the first day f the Initial Measurement Perid s lng as the Initial Measurement Perid ends n the last f the payrll perid that includes the date that wuld therwise be the last day f the Initial Measurement Perid. Identify Breaks in Service. An emplyee wh has a perid during which the emplyee has n Hurs f Service fr at least 13 full weeks r lnger (26 weeks r lnger fr emplyees f Educatinal Organizatin) is treated as having a Break in Service. An emplyee wh resumes Hurs f Service after a Break in Service is cnsidered a new emplyee whereas an emplyee wh des nt experience a Break in Service is cnsidered a Cntinuus Emplyee. There is als a rule f parity that treats as a Break in Service as any perid with n Hurs f Service that is at least fur weeks in duratin and greater than the prir perid f emplyment (determined after applying the special rule fr Special Unpaid Leaves and Emplyment Breaks). See Appendix C fr examples that illustrate the Break in Service rules. Averaging Rules fr Special Unpaid Leaves and Emplyment Breaks. There are special averaging rules fr Cntinuus Emplyees whse Break In Service during the Measurement Perid was due in whle r part t a special unpaid leave r t emplyment breaks (if the emplyer is an Educatinal Organizatin). See Appendix D fr a mre detailed verview f the special averaging rules fr special unpaid leaves. 16
Different Measurement Perids fr different classes f distinguishable emplyees. Emplyers may vary the Initial Measurement Perid amng the distinguishable class f emplyees in the same manner as the Standard Measurement Perid. Changes in emplyment status during Initial Measurement Perid. If a Variable/Seasnal/Part-time Emplyee experiences a change in emplyment status befre the end f the Initial Measurement Perid such that the emplyee, if hired int that new psitin, wuld reasnably be expected t be emplyed n average at least 30 Hurs f Service per week, then a Limited Nn-Assessment Perid will apply with respect t (i) any full-calendar mnth that the emplyee is therwise eligible fr cverage prviding minimum value but is nt ffered cverage due slely t a waiting perid (nt t exceed 3 full calendar mnths) and (ii) the emplyee is ffered cverage prviding minimum value by n later than the 1 st day f the 4 th full calendar mnth fllwing the emplyment status change r, if earlier the 1 st day f the Stability Perid (if the emplyee averaged 30 Hurs f Service r mre per week during the Initial Measurement Perid). Establish a Stability Perid fr emplyees wh averaged the requisite Hurs f Service during the Initial Measurement Perid. The emplyer must establish a Stability Perid fllwing the Initial Measurement Perid (and any assciated administrative perid). The Stability Perid fr emplyees wh averaged the requisite Hurs f Service during the Initial Measurement Perid is subject t the fllwing fundamental requirements: Qualifying Full-time Emplyees are in a Limited Nn-Assessment Perid during the Initial Measurement Perid. Cnsequently, Qualifying Full-time Emplyees wh are nt ffered cverage by the first day f the Stability Perid culd trigger excise taxes fr each mnth f the Qualifying Full-time Emplyee s Initial Measurement Perid that the emplyee had 130 Hurs f Service r mre. Status during Stability Perid. Status during Stability Perid. The emplyee is a Qualifying Full-time Emplyee fr each mnth f the Stability Perid (r until the emplyee s emplyment is terminated, whichever is earlier) regardless f the actual Hurs f Service during such mnth. If the emplyee takes an unpaid leave f absence, the Qualifying Full-time Emplyee must remain eligible fr Qualifying Cverage during the unpaid leave f absence t the extent emplyed by the emplyer. If, hwever, the Qualifying Full-time Emplyee terminates emplyment, cverage may be terminated withut risk f excise taxes under the 4980H Rules. If the Qualifying Full-time Emplyee resumes Hurs f Services as a Cntinuus Emplyee, the Qualifying Fulltime Emplyee must be ffered cverage (t the extent previusly elected and then lst during the perid with n Hurs f Service) n later than the 1 st day f the mnth fllwing the date Hurs f Service resume. If the Qualifying Full-time Emplyee resumes Hurs f Service after experiencing a Break in Service (as defined abve), then the ALE Member may treat the emplyee as a new emplyee upn resumptin f Hurs f Service. See Appendix C fr examples that illustrate this rule. 17
Duratin f Stability Perid fr Qualifying Full-Time Emplyees. The Stability Perid fllwing the Initial Measurement Perid fr such emplyees must be at least six mnths in duratin, n shrter in duratin than the Standard Measurement Perid and it must begin immediately fllwing the Standard Measurement Perid and any applicable Administrative Perid. See Additinal Cnsideratins belw fr a mre detailed discussin n the duratin f the Stability Perid. Establish a Stability Perid fr emplyees determined t NOT be full-time during the Initial Measurement Perid. The Stability Perid fr emplyees wh are determined nt t be full-time during the Initial Measurement Perid is subject t the fllwing fundamental requirements: Status during Stability Perid. If an emplyee des nt have the requisite Hurs f Service ver the Initial Measurement Perid, then he r she is nt a Qualifying Full-Time Emplyee during any mnths f the Stability Perid that fllws the Initial Measurement Perid (and Administrative Perid). Duratin f Stability Perid fr emplyees wh are NOT Qualifying Full-time Emplyees. The Stability Perid fr such an emplyee cannt be mre than ne mnth lnger in duratin than the Initial Measurement Perid. Transitin frm variable/seasnal/part-time t nging emplyee. If there is a gap between the end f the Stability Perid fllwing the Initial Measurement Perid and the date the Stability Perid fllwing the Standard Measurement Perid begins, the treatment affrded t the emplyee during the Stability Perid fllwing the Initial Measurement Perid is cntinued until the start f the next Stability Perid. See Appendix C fr an example that illustrates this rule. Establish an administrative perid. The Administrative Perid is the perid during which emplyees are identified as Qualifying Full-time Emplyees (r nt) based n their Hurs f Service during the Initial Measurement Perid and, if identified as a Qualifying Full-time Emplyee, ffered the pprtunity t enrll fr the Stability Perid. The Administrative Perid fllwing the Initial Measurement Perid may nt exceed 90 calendar days. Hwever the duratin f the Initial Measurement Perid and the fllwing administrative perid cannt extend beynd the last day f the mnth that begins n r after the emplyee s anniversary date. Additinal Cnsideratins: In light f the abve mentined fundamental rules, emplyers shuld cnsider the fllwing factrs in establishing their Initial Measurement and fllwing Stability Perids: Preferred Measurement Perid duratin. ALE Members shuld cnsider establishing an Initial Measurement Perid that is n less than 11 mnths. Since the Stability Perid fr emplyees wh are Qualifying Full-time Emplyees must be the same as the Stability Perid fr Onging Emplyees wh are Qualifying Full-time Emplyees, and the Stability Perid fr emplyees wh d nt average the requisite Hurs f Service during 18
the Initial Measurement Perid must be n mre than 1 mnth lnger in duratin than the Initial Measurement Perid, an emplyer wh implements an Initial Measurement Perid that is shrter than 11 mnths will have t implement tw sets f rules ne fr emplyees wh are cnsidered t be full-time and anther fr emplyees wh are nt cnsidered t be full-time. See Appendix C fr an illustratin f the Lk Back Measurement Perid Methd fr new emplyees. E. The Mnthly Measurement Perid Methd If the ALE Member des nt use the Lk Back Measurement Perid Methd, then the ALE Member may use the Mnthly Measurement Perid Methd. The Mnthly Measurement Perid Methd is subject t the fllwing fundamental requirements: Identifying Qualifying Full-time Emplyees: All emplyees wh have 130 Hurs f Service (unless using the Weeks Apprach defined belw) in a mnth will be a Qualifying Full-time Emplyee fr such mnth; hwever, the ALE Member may avid excises taxes fr mnths that Qualifying Cverage is nt ffered unless that mnth is part f a Limited Nn-Assessment Perid. Cntinuus emplyees are subject t a ne-time Limited Nn-Assessment Perid. The fllwing Limited Nn-Assessment Perids apply t an emplyee under the Mnthly Measurement Perid Methd: (i) the first partial mnth f emplyment; (ii) any f the first three full-calendar mnths beginning with the mnth that the emplyee first has the requisite Hurs f Service prvided that (A) the emplyee is therwise eligible fr cverage under a plan and is nt ffered cverage during any such mnth due slely t a waiting perid (ii) cverage prviding minimum value is ffered t the Qualifying Full-time Emplyee (if still emplyed) by n later than the 1 st day f the 4 th full calendar mnth beginning with the first full-calendar mnth that the emplyee first had the requisite Hurs f Service. The Limited Nn-Assessment Perid nly applies nce t any Cntinuus Emplyee. If the emplyee has a perid f less than 13 weeks with n Hurs f Service (26 weeks if the entity is an Educatinal Organizatin), and then resumes service, the Limited Nn- Assessment Perid des nt apply again and the ALE Member will be subject t excise taxes fr any mnth that the Qualifying Full-time Emplyee is nt ffered qualifying cverage by the ALE Member and als receives a Premium Subsidy in the Marketplace. See Appendix C fr examples that illustrate the Mnthly Measurement Perid Methd and the applicatin f the Limited Nn-Assessment Perid. ALE Members may use a weeks apprach. The ALE Member may determine full-time status fr a calendar mnth based n Hurs f Service ver a perid that (i) begins n the first day f the week that includes the first day f the calendar mnth s lng as the perid des nt include the 19
week in which falls the last day f the calendar mnth (unless that week ends with the last day f the mnth) r (ii) begins n the first day f the week immediately subsequent t the week that includes the first day f the calendar mnth s lng as it includes the week in which the last day f the mnth falls. Under this methd, the Hurs f Service limit fr mnths with 4 weeks is 120 hurs and 150 fr mnths with 5 weeks. Special rules apply when an emplyee changes psitins t which different methds apply. The fllwing rules apply when an emplyee changes status frm a psitin t which ne methd applies t a psitin t which anther methd applies. Frm lk back t mnthly: If an emplyee changes psitins during a Stability Perid, the emplyer will cntinue t treat the emplyee accrding t the status (full-time r nt) the emplyee maintained prir t the change in emplyment status fr the remainder f that Stability Perid even thugh the emplyee is nw in a psitin t which the Mnthly Measurement Perid applies. Fr the Stability Perid that fllws the Measurement Perid in which the change in status ccurred, the emplyee must be treated as full-time thrughut the Stability Perid fllwing that Measurement Perid in which the change in status ccurred if the emplyee averaged 30 Hurs f Service r mre per week during that Measurement Perid bth befre and after the change. Otherwise, if the emplyee did nt average the requisite Hurs f Service during that Measurement Perid that the change in status ccurred, the emplyee wuld nly qualify as a Full-time Emplyee fr each calendar mnth that the emplyee averaged the requisite Hurs f Service. Frm mnthly t lk back: If an emplyee changes psitins during the Stability Perid fr the new psitin, then the ALE Member wuld cntinue t apply the Mnthly Measurement Perid t that emplyee, even thugh the emplyee is nw in a psitin t which the lk back Measurement Perid applies, unless the emplyee s Hurs f Service prir t the change wuld have resulted in the emplyee being treated as a Full- Time Emplyee during that Stability Perid in which the change ccurred; in that case, the emplyee must be treated as a full-time fr the remainder f that Stability Perid. Fr the Stability Perid that fllws the Measurement Perid in which the change in status ccurred, the emplyee will cntinue t qualify as a Full-Time Emplyee thrughut the Stability Perid fllwing that Measurement Perid in which the change in status ccurred if the emplyee averaged 30 Hurs f Service r mre per week during that Measurement Perid bth befre and after the change. Otherwise, if the emplyee did nt average the requisite Hurs f Service during that Measurement Perid that the change in status ccurred, the emplyee wuld nly be a Qualifying Full-time Emplyee fr each calendar mnth that the emplyee had the requisite Hurs f Service. 20
Step #3. Determine whether excise taxes will be wed Step #3 Overview: Determine whether an ALE Member ffers cverage during a mnth thrugh an Eligible Emplyer Spnsred Plan t all but 5% (r if greater, 5) f its Qualifying Full-Time Emplyees fr that mnth. In ther wrds, the ALE Member must ffer cverage thrugh an Eligible Emplyer Spnsred Plan t 95% f its Full-Time Emplyees t whm qualifying cverage must be ffered (fr 2015, the applicable percentage is 70%). If it des, then the ALE Member is nt liable fr the Sledgehammer Tax (but may be liable fr the Tackhammer Tax). Determine whether an effective ffer f cverage is made t a Qualifying Full-time Emplyee. Generally, an ffer is effective if the fllwing cnditins are satisfied: The ffer f cverage must include an ffer f cverage fr a dependent child. A dependent child is defined as a natural r adpted child r child placed with the emplyee fr adptin. Interestingly the final regulatins exclude step children and fster children frm the definitin f dependent child fr purpses f the 4980H Rules. Cverage ffered must be effective fr the entire mnth except in certain limited situatins. The emplyee has a reasnable pprtunity t elect r decline cverage at least nce every plan year, which is a defined as a 12 mnth perid. N pprtunity t decline is required if the ALE Member ffers cverage t the emplyee (and the emplyee s dependent children) that is affrdable and prvides minimum value. Determine whether any cverage ptin thrugh an Eligible Emplyer Spnsred Plan that als prvides minimum value is affrdable. 4980H rules prvide three different safe harbr methds fr making the affrdability determinatin. The final regulatins made minr changes t the affrdability safe harbrs. Determine whether the cverage ffered prvides minimum value. A plan prvides minimum value if it pays fr 60% f the allwed csts, which are based n essential health benefits. A. Determining Excise Tax Liability-Fundamental Principles Once Qualifying Full-Time Emplyees are identified, the ALE Member must assess its current ffering t determine whether it wuld be subject t any excise taxes. ALE Members shuld remember the fllwing fundamental rules when analyzing what, if any, excise taxes it may we: As a threshld matter, ALE Members must ffer cverage accrding t the 4980H Rules in rder t avid excise taxes. If the pprtunity t elect cverage is prvided but it des nt qualify as an ffer under the 4980H rules, it is as thugh the ALE Member did nt ffer cverage at all. This will play a significant rle in whether the ALE Member satisfies the Substantially All Test r nt. ALE Members cntrl their wn destiny and avid all excise taxes under 4980H nly t the extent cverage thrugh an Eligible Emplyer Spnsred Plan that is affrdable and 21