The U.S. Department of the Treasury has asked for public comments about potential approaches to implementing the shared responsibility (also known as employer “pay or play”) provisions of the Patient Protection and Affordable Care Act (PPACA), as well as general comments about the 90-day waiting period requirement and the relationship among the waiting periods, automatic enrollment provisions, and shared responsibility provisions.

Employers should carefully review the request, set forth in IRS Notice 2011-36, and determine whether they wish to take advantage of this unusual advance opportunity to influence the regulatory process. The last day for submitting comments is June 17, 2011.

The shared responsibility provisions impose a monthly penalty during calendar years beginning on and after January 1, 2014, on an “applicable large employer” when one or more of its “full-time employees” enrolls in a health plan through a health care exchange for the month and receives a premium tax credit or cost-sharing reduction. The amount of the monthly penalty is related to the number of full-time employees the employer has that month. The potential approaches for implementing the shared responsibility provisions include the following:

  • An employer and an employee will be defined using common law principles and the controlled group rules in the Internal Revenue Code.
  • An ongoing employer will be considered an applicable large employer for a calendar year if the sum of the employer’s full-time employees and full-time equivalent (FTE) employees for each month in the prior calendar year when divided by 12 is at least 50, subject to the application of a special rule for “seasonal employees.”
  • An employee could be considered a full-time employee for a month if the employee has at least 130 hours of service that month.
  • An hourly employee could be credited with an hour of service for each hour that the employee is paid or entitled to payment, and for each hour the employee performs no services (based on rules set forth in U.S. Department of Labor regulations relating to retirement plans), up to 160 hours for any continuous period of nonperformance. Alternatively, salaried and other employees could be credited with hours of service using a days-worked equivalency or a weeks-worked equivalency modeled on the existing DOL regulations.
  • The hours of service in a month of any part-time employee are combined and divided by 120 to yield the number of FTEs for that month only for purposes of determining if an employer is an applicable large employer.
  • An employer that would otherwise be an applicable large employer and employs seasonal workers will not be considered as such if the employer’s full-time employees and FTEs, excluding seasonal employees, exceeds 50 for no more than four months in the preceding calendar year. The Notice does not contemplate guidance about the interpretation of the term “seasonal employee.”
  • For purposes of imposing the penalty, only full-time employees in excess of 30 employed in the month for which the penalty is payable are counted. Because of the challenges a monthly determination could create for employers and the health care exchanges, the Notice summarily describes a look-back/stability period approach, which could be available on an optional basis to employers.
  • A penalty will not be payable by an employer extending acceptable coverage to all, or substantially all, of its full-time employees. The Notice does not specify any numerical standard for determining whether an employer is offering acceptable coverage to substantially all of its full-time employees. However, comments are requested regarding categories of full-time employees whose exclusion from acceptable coverage should not result in a penalty and other situations in which application of a penalty may not be justified

If you need assistance in responding to the request for comments on the “pay or play” provisions of PPACA or have questions, contact Brian M. Pinheiro at 215.864.8511 or

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