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Employer Penalties – Multi-employer Plans

Filed under: Health Care Reform

Beginning in 2014, the Affordable Care Act (ACA) imposes "pay or play" requirements on large employers. Under these requirements, large employers that do not offer health coverage to their full-time employees and their dependents, or that offer coverage that is either unaffordable or does not provide minimum value, may be subject to a penalty. This penalty is also referred to as a "shared responsibility payment."

On Jan. 2, 2013, the Internal Revenue Service (IRS) published proposed regulations that provide transition relief for employers participating in multi-employer plans from the "pay or play" requirements. Although the proposed regulations are not final, employers may rely on them until final regulations or other applicable guidance is issued.


A "multi-employer plan" is a collectively bargained plan maintained by more than one employer and has a joint board of trustees representing employees and employers. Each participating employer's relationship with the plan, and the employee's participation in the plan, differs from the typical single-employer-sponsored arrangement. For example, service at participating employers generally is aggregated to determine an employee's eligibility to participate in the multi-employer plan, even though the participating employers generally are not related.

Because many of the collective bargaining agreements governing multi-employer plans provide that contributions be made to the multi-employer fund based on requirements other than hours worked, contributing employers may not be in a position to know how many hours any individual employee worked.

The proposed regulations provide transition relief that applies through 2014 for contributions made by applicable large employers participating in a multi-employer plan (applicable large employer members). This transition rule applies to an applicable large employer member that:

  • Is required by a collective bargaining agreement to make contributions to a multi-employer plan that offers, to individuals who satisfy the plan's eligibility conditions, coverage that is affordable and provides minimum value; and
  • Offers coverage to those individuals' dependents.

Under this transition rule, with respect to employees for whom the employer is required to make contributions to the multi-employer plan, the applicable large employer member will not be treated as failing to offer the opportunity to enroll in minimum essential coverage to full-time employees (and their dependents) and will not be subject to a "pay or play" penalty.

This relief is available only with respect to multi-employer plans and does not apply to any single employer plan to which contributions are made pursuant to a collectively bargained agreement. The IRS is seeking additional comments on how the "pay or play" rules should apply to employers participating in multi-employer plans.

Source: Internal Revenue Service

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

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