What Cities Need to Know about the ACA’s Employer Mandate Rules

February 18, 2014

By Neil Bomberg

On February 12, 2014, the U.S. Department of Treasury issued its final employer mandate rules governing large employers (those with 50 or more employees) under the Affordable Care Act (ACA).  Known as the “employer shared responsibility” or “employer mandate” rules, these rules require that employers with 50 or more full-time and/or full-time equivalent employees provide those employees and their dependents with affordable health care coverage that meets specified standards, or face financial penalties.  

When the rules were released, what garnered the most media attention was the portion of the rule that states that employers with 50 to 99 full-time workers have one more year to comply with the law.  This means they will not have to comply with the shared responsibility provisions until January 1, 2016, after which they will be subject to any and all penalties and fees if they fail to comply with the ACA. 

From the perspective of cities, however, this provision may be the least important.

The rule includes many other provisions, including those pertaining to seasonal employees and volunteer employees including first responders that are very important to cities and will go into effect on January 1, 2015.

Specifically, the rule:   

  • Clarifies the meaning of the term governmental entity to include “the government of the United States, any State or political subdivision thereof, any Indian tribal government, or any agency or instrumentality of any of the foregoing.”; 
  • Reiterates that a large employer for purposes of the ACA is one that within the preceding calendar year employed an average of 50 or more full-time and full-time equivalent employees;
  • Grants employers a 12 month “look back” period to determine whether an employee is full- or part-time;
  • Clarifies that the term full-time equivalent employee, or FTE, “means a combination of employees, each of whom individually is not treated as a full-time employee because he or she is not employed on average at least 30 hours of service per week with an employer, but whom, in combination, are counted as the equivalent of a full-time employee solely for purposes of determining whether the employer is an applicable large employer.”; and
  • Provides that any employer who transitions from a small employer to an applicable large employer and provides qualified health care coverage to its employees by April 1 of the same calendar year in which they become a large employer will not be subject to any of the penalties for failing to meet the large employer mandate.

Seasonal Employees
The Department of Treasury also ruled that an employer is not considered to employ more than 50 full time employees if:  “(1) the employer’s workforce exceeds 50 full-time employees for 120 days or fewer during the calendar year, and (2) the employees in excess of 50 employed during such 120-day period are seasonal workers as defined by the Secretary of Labor.” This should help cities with small full-time workforces but larger seasonal workforces remain exempt from the employer mandate if those employees meet the Dept. of Labor’s seasonal worker definition.  

Volunteer First Responders
Most notably, the final rule provides that the hours of bona fide volunteers do not count toward the “number of employees” calculation under the ACA.  This includes volunteer first responders who receive deferred compensation benefits, reimbursements or allowances for reasonable expenses incurred in the performance of services as volunteers or nominal fees customarily paid in connection with the performance of services.  

This rule is significant for small communities with fire departments whose workforce meets the Treasury’s definition of volunteer first responders that may have been concerned that the need to count their volunteers would cause them to be subject to all of the rules for large employers under the ACA.  

However, so-called volunteers who receive more than nominal compensation - expense reimbursements, small stipends or length of service pension benefits - will not be considered bona fide volunteers and will have to be counted as employees for purposes of the ACA.  This means that cities and towns where volunteers receive compensation that is more than nominal, even if it is less than what is paid to regular firefighters, will have to count their volunteers as employees for purposes of the ACA.  

This conforms to NLC’s previous discussions about how (bona fide) volunteer first responders should be considered under the ACA, and its more recent assessment based on Treasury's January 10, 2014, memo regarding fair treatment of volunteer firefighters.