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CMS Finalizes Delay of ACA Employer Mandate

February 28, 2014
AAA Member Advisory
TO: AAA Membership
FROM:      American Ambulance Association
RE:           AAA Member Advisory - CMS Finalizes Delay of ACA Employer Mandate & Exempts Certain Volunteers from Full Time Employee Count

By:  Kathy Lester

Earlier this month, CMS issued the final rule under the ACA that would provide an additional year for employers with 50 to 99 full-time workers to comply with the employer mandate before having to pay fees for failing to offer affordable health care. The final rule also excludes hours of service by “bona fide volunteer” from the definition of “hours of service.”

In the preamble to the final rule, the Internal Revenue Services (IRS) responds to comments that recommended that the “hours of service performed in the capacity of a volunteer for a government entity or tax-exempt organization not be counted as hours of service for purposes of” determining the employer mandate. The Agency explains, “hours worked by a volunteer who does not receive (and is not entitled to receive) compensation in exchange for the performance of services are not treated as hours of service for purposes of section 4980H” [the employer mandate]. Commenters highlighted that some volunteers might not fit this definition because they are paid a salary that is generally at a rate lower then non-volunteers or receive expense reimbursements, stipends, or similar forms of compensation.

In response, the IRS states that the “hours of service” will not include hours worked as a “bona fide volunteer.” It references the existing definition of “bona fide volunteer,” “which provides special rules for length of service awards offered to certain volunteer firefighters and emergency medical providers under a municipal deferred compensation plan.” However, it also notes that for purposes of the employer mandate:

bona fide volunteers are not limited to volunteer firefighters and emergency medical providers. Rather, bona fide volunteers include any volunteer who is an employee of a government entity or an organization described in section 501(c) that is exempt from taxation under section 501(a) whose only compensation from that entity or organization is in the form of  (i) reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of services by volunteers, or (ii) reasonable benefits (including length of service awards), and nominal fees, customarily paid by similar entities in connection with the performance of services by volunteers.

The new regulatory text will read:

(7) Bona fide volunteer. The term bona fide volunteer means an employee of a government entity or an organization described in section 501(c) that is exempt from taxation under section 501(a) whose only compensation from that entity or organization is in the form of—
(i) Reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of services by volunteers, or
(ii) Reasonable benefits (including length of service awards), and nominal fees, customarily paid by similar entities in connection with the performance of services by volunteers.

The final rule also delays the application of the employer mandate until January 1, 2016, for businesses with 50 to 99 full-time workers. These businesses will still have to comply with the reporting requirements beginning January 1, 2015. To qualify for this transition period, however, employers must certify that they have not reduced the number of employees to drop below the 100-employee threshold.

Guaranteed cash flow during transition.