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The Wagner Law Group Description 

The Wagner Law Group, A Professional Corporation, is a nationally recognized ERISA & employee benefits, estate planning, employment, labor & human resources practice. 


Established in 1996, The Wagner Law Group has 22 attorneys engaged exclusively in employee benefits, estate planning and employment law. Five of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.



Contact Info

The Wagner Law Group


  Integrity | Excellence


Massachusetts Office 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

Florida Office 

Tel: (561) 293-3590
Fax: (561) 293-3591
7121 Fairway Drive
Suite 203
Palm Beach Gardens, FL 33418


San Francisco Office

Tel: (415) 625-0002

Fax: (415) 829-4385

315 Montgomery Street

Suite 902

San Francisco, CA 94104





January 10, 2013 

 State and Federal Law Alert


IRS Issues Proposed Regulations on PPACA's Employer Shared Responsibility Provisions 


The IRS has released proposed regulations that provide additional guidance to help employers determine whether they are subject to the employer shared responsibility provisions (i.e., the pay-or-play mandate) under the Patient Protection and Affordable Care Act ("PPACA") and, if so, how to comply. Beginning in 2014, PPACA's employer shared responsibility provisions require employers with 50 or more full-time equivalent employees ("FTEs") to provide affordable health care coverage that offers a minimum level of coverage or to pay a penalty. This Alert focuses on the sections within the proposed regulations that determine which employers are subject to the mandate and when compliance must begin.


Employers Subject to Mandate. The regulations provide that employers will determine whether they meet the 50 FTE threshold and are subject to the mandate by averaging the number of FTEs for the calendar months of the previous calendar year.


An employer will determine its monthly FTEs count by adding: (i) each employee who works more than 30 hours per week (i.e., full-time), and (ii) the total number of hours worked during a month by employees who are not full-time, divided by 120. Monthly FTE counts are then totaled and divided by 12. If the resulting number is 50 or more, the employer is subject to the mandate.


The regulations clarify that:

  • "Employee" means common law employee, a concept which is based on direction and control.
  • Partners in a partnership (or members in an LLC taxed as a partnership), sole proprietors, and 2% or more S-corporation shareholders are not employees.
  • The IRS's leased employee rules, which for certain purposes require leased employees to be treated as employees of the service recipient, do not apply.
  • All employers, regardless of whether the entity is a for-profit, non-profit or governmental (i.e., federal, state, local or Indian tribal) employer must comply with the mandate.
  • No special rules apply to high turnover positions.
  • Special anti-abuse rules apply to temporary staffing agencies to prevent employers from using them to avoid being subject to the mandate. 

Seasonal Workers. The regulations provide a special rule applicable to seasonal workers that allows employers to avoid being subject to the mandate if they exceed 50 FTEs for 120 or fewer days during the prior calendar year solely because of seasonal workers. A "seasonal worker" is defined as: (i) a worker who performs labor or service on a seasonal basis; (ii) retail workers employed exclusively during the holiday season; and (iii) any other reasonable, good faith interpretation adopted by the employer.


Controlled Groups. All employees of all members of a controlled group (or affiliated service group) must be counted when determining whether an employer meets the 50 employee threshold. However, penalties imposed under the mandate will be assessed on an individual member basis. For example, a member of a controlled group of corporations that provides health coverage to its full-time employees and dependents will not be subject to the penalty because another member of the controlled group does not provide coverage. If a member of a controlled group is assessed a penalty under the mandate, the calculation of the penalty will be based on the number of FTEs employed by that member and not on the total number of FTEs within the controlled group.


Employees Working Outside U.S. In general, only work performed in the U.S. will be counted by employers when determining hours of service for purposes of counting FTEs. Thus, if a foreign employer has a large workforce worldwide but less than 50 FTEs in the U.S., that employer would not be subject to the mandate. Employers can also exclude workers exclusively employed outside the U.S., regardless of whether the workers are U.S. citizens.


Mergers and Acquisitions. Employers must count employees of predecessor employers when determining whether they are subject to the mandate. Successor employers may also be liable for any mandate penalties owed by the predecessor employers.


Effective Date and Transition Relief. Under PPACA, the mandate was originally slated to take effect on January 1, 2014, regardless of whether an employer's plan year or insurance policy was based on a fiscal year. Many employers that provide group health plan coverage through a fiscal year plan expressed concerns that, if later regulations are issued that cause their coverage to fail to satisfy the minimum requirements under the mandate, they would be unable to renegotiate their insurance contracts and, therefore, be forced to pay the penalty.


The regulations provide transition relief for employers that offered group health plan coverage on December 27, 2012, through a plan that operates on a fiscal year basis. These employers will not be subject to the mandate until the first fiscal year beginning in 2014 if either: (i) employees were eligible to participate in the plan under its terms as of December 27, 2012, regardless of whether or not the employee takes the coverage; (ii) at least one-third of full- and part-time employees were offered coverage under the plan at the most recent open enrollment; or (iii) at least one-quarter of employees were covered under the plan on any day between October 31, 2012 and December 27, 2012.


While the release of the proposed regulations provides employers with some clarity on PPACA's employer shared responsibility mandate, the formidable challenge of preparing for full implementation of PPACA remains. Employers face many new administrative burdens and must make many key strategic decisions in the coming months. Employers are advised to retain qualified employee benefits assistance to ensure that their new compliance obligations under PPACA are satisfied.



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Pursuant to Internal Revenue Service Circular 230, we hereby inform you that any advice set forth herein with respect to US federal tax issues is not intended or written by The Wagner Law Group to be used and cannot be used, by you or any taxpayer, for the purpose of avoiding penalties that may be imposed on you or any other person under the Internal Revenue Code.


This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.