The Affordable Care Act, the federal health care reform law enacted in 2010, added a provision to the Internal Revenue Code ("Code") (Code Section 4980H) that, beginning on January 1, 2015, may subject employers to an excise tax penalty if a covered employer fails to offer health plan coverage to a sufficient number of its employees and their dependents or if it offers coverage that is deemed unaffordable or fails to provide a prescribed minimum level of benefit value. This new penalty provision, formally known as the "employer shared responsibility penalty," is often referred to as the "employer pay or play" mandate. In this Alert, these new rules are referred to as the "Employer Mandate."

The Internal Revenue Service and U.S. Treasury Department recently issued final regulations and related frequently asked questions concerning the Employer Mandate (collectively, the "Final Regulations"). The rules are complex and can require detailed consideration of the nature of an employer's workforce, including the hours of service worked by employees. We previously issued an Alert in March 2013 that described then proposed regulations under the Employer Mandate. As the Final Regulations generally follow the proposed regulations, much of the terminology and operational rules under the proposed regulations and discussed in our prior Alert has been carried forward into the Final Regulations and this Alert. However, the Final Regulations provide for some important changes and clarifications from the proposed rules, which are highlighted in this Alert. This Alert is intended to provide an overview of the key provisions of the Final Regulations, including some helpful transition rules, to assist employers in understanding the Employer Mandate requirements that apply beginning in 2015.

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