Most states, including Minnesota and Wisconsin, currently define a small employer as one with 50 or fewer employees. However, effective for plan years on or after January 1, 2016, the ACA distinctly defines a “small employer” as an employer that employs on average of between one and 100 employees on business days during the preceding calendar year and that employs at least two employees on the first day of the plan year.
According to various issuers, renewing early will allow some employers to continue to purchase policies in the large group market, allowing them to postpone additional costs, such as the community rating requirements – as well as other reforms that apply in the small group market, until their 2016 renewal.
If you are considering an early renewal, keep in mind that federal agencies implementing the ACA and other employee benefit laws have not addressed whether these early renewals are permissible. Because of this, organizations need to consult with their benefit advisor and legal counsel to determine how an early renewal could impact them.
Here’s an example of a real consideration: The IRS’s final regulation on the ACA’s employer shared responsibility penalty provide that once a plan year is established, it can only be changed for a valid business reason. Applicable large employers, or ALEs (employers with 50 or more full-time and full-time equivalent employees) are prohibited from changing plan years to avoid the employer penalty under the final regulations. Specifically:
- ALEs that have fewer than 100 full-time employees (including full-time equivalents) generally will have an additional year, until 2016, to comply with the employer shared responsibility rules. However, ALEs that change their plan year after February 9, 2014, to begin on a later calendar date, are not eligible for this delay.
- ALEs that maintain a non-calendar year plan may qualify for certain transition relief that would delay the employer shared responsibility rules until the beginning of the 2015 play year. However, ALEs that modify their plan year after December 27. 2012, to begin at a later calendar date, are not eligible for this transition relief.
So, if you are looking at an early renewal – be sure you are aware of the ACA reforms as it may have other consequences.
Remember to keep health care reform compliance focused on your radar.