August 2014 HR Alert | Determining Which Employers Are Subject to ACA Pay or Play Rules
View this email in your browser

Same-Sex Spousal Retirement Plan Benefits and Compliance Issues 

It has been over a year since the U.S. Supreme Court's decision in United States v. Windsor (delivered June 26, 2013) to strike down Section 3 of the Defense of Marriage Act (DOMA), which had defined "marriage" for federal purposes as a legal union between one man and one woman, and a spouse as an opposite sex husband or wife. Included below is an outline of key components of retirement plans that are impacted by the Windsor decision and may require employer action.

In IRS Revenue-Ruling 2013-17 (issued August 29, 2013) (the "Ruling"), the Treasury Department indicated that couples legally married in states that recognize same-sex marriages will be treated as married for all federal tax purposes where marriage is a factor (e.g., income, gift, estate taxes). The Ruling clarified that marriage does not include domestic partners, civil unions, or other similar formal relationships under state law.

In IRS Notice 2014-19 (issued April 4, 2014) (the "Notice"), the Treasury Department clarified that beginning September 16, 2013, qualified retirement plans must follow a "state of celebration" rule, meaning marital status depends on whether the same-sex marriage was legal in the state or jurisdiction where the couple was married, at the time of marriage. Currently, 19 states and the District of Columbia permit same-sex marriage and 31 states (including Georgia) do not. For example, if a couple was legally married during 2012 in Massachusetts (a state that legally recognizes same-sex marriages) and now resides in Georgia, they should be treated as married for federal tax purposes. 

It is advisable for employers to review the following qualified retirement plan forms and procedures to ensure that the term "spouse" does not refer to an opposite sex spouse only:
  • Distribution election forms
  • Beneficiary designation forms
  • Summary plan descriptions
  • Hardship withdrawal procedures
  • Loan procedures 
  • Qualified domestic relation order procedures 
  • Required minimum distribution procedures 
For most plans, the deadline for adopting a qualified retirement plan amendment reflecting the changes set forth in the Notice will be December 31, 2014. A plan sponsor should also consider communicating to employees the changes under Windsor and the importance of notifying the employer of any changes in an employee's marital status. Plans sponsors are advised to work with employee benefits counsel to ensure timely compliance with the various changes required as a result of Windsor. 



HR Alert

August 2014

The following is an excerpt from the article, "Pay or Play: Determining Which Employers Are Subject to the Penalties Under Health Care Reform"  by Anne Tyler Hamby. It was published as an article on the Pro Bono Partnership of Atlanta website.

Beginning January 1, 2015, the Patient Protection and Affordable Care Act ("ACA") requires Applicable Large Employers (defined below) with 100 or more Full-Time Employees or Full-Time Equivalents to provide health coverage or pay a penalty for failure to do so (the "Pay or Play Rules"). The Pay or Play Rules apply to Applicable Large Employers (ALEs) with at least 50 but less than 100 Full-Time Employees or Full-Time Equivalents beginning with the 2016 plan year. This HR Alert provides an overview of the ACA rules for determining ALE status.   

How Does ACA Define ALE?  

Under ACA, an ALE is defined as an employer (and any other employer within the same controlled group) who, with respect to a calendar year, employed at least 50 employees for more than 120 business days during the preceding calendar year. For purposes of this calculation, an employer should include both Full-Time Employees and Full-Time Equivalents. A Full-Time Employee is defined as an employee who is employed, on average, at least 30 hours per week. An employer's Full-Time Equivalents are determined by dividing the aggregate number of hours of service of employees who are not Full-Time Employees for the month by 120.

Are All Employees In A Controlled Group Included In Determining ALE Status?

Yes, all employees of a controlled group under Internal Revenue Code Sections 414(b) or 414(c) (generally this includes employees of parent companies, subsidiaries, and brother-sister companies) are considered when determining whether an employer is an ALE.

How Is ALE Status Determined for New Employers?  

The employer's size is generally determined based upon the number of Full-Time Employees and Full-Time Equivalents in the prior calendar year. However, the Pay or Play Rules state that an employer can still be an ALE that is subject to the Pay or Play Rules if the employer "reasonably expects" to employ an average of at least 50 Full-Time Employees and Full-Time Equivalents during the current calendar year.

Can An Employer Be Subject To The Pay or Play Rules Even If It Does Not Currently Employ 50 Full-Time Employees?

If an employer employs less than 50 Full-Time Employees, it must calculate the number of Full-Time Equivalents it had during the prior calendar year in order to determine whether it is an ALE. Below are some of the circumstances in which an employer can be subject to the Pay or Play Rules even if it does not currently employ 50 Full-Time Employees:
  • The employer is part of a controlled group and the total Full-Time Employees or Full-Time Equivalents of the controlled group equals at least 50;
  • The employer is a new employer and expects to employ an average of at least 50 Full-Time Employees and Full-Time Equivalents in the current calendar year; or
  • The employer has enough Full-Time Equivalents to cause the employer to be treated as an ALE.
Hamby Benefits Law, LLC recommends that you consult with employee benefits legal counsel to assist you with determining ALE status of an employer.    

This HR Alert was written by:
Anne Tyler Hamby
Employee Benefits Attorney
3525 Piedmont Rd NE
7 Piedmont Center, Suite 300
Atlanta, GA 30305
(470) 223-3095 (office)
(404) 861-7441 (cell)
Specializing in retirement plans, health and welfare benefits and executive compensation law

This HR Alert is intended to provide a summary of significant developments to clients and friends.  It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under rules of certain jurisdictions.

Copyright © 2014 Hall Benefits Law, All rights reserved.

unsubscribe from this list    update subscription preferences 

Email Marketing Powered by Mailchimp