Dear Sir or Madam,

The Business Roundtable (“BRT”) is an association of chief executive officers of leading U.S. companies. Together, our members’ companies employ more than 12 million individuals and provide health care coverage to over 35 million American workers, retirees, and their families. BRT is invested in addressing health care costs that hamper essential economic growth.

BRT appreciates the opportunity to submit comments in response to IRS Notice 2011-36, Request for Comments on Shared Responsibility for Employers Regarding Health Coverage (§ 4980H), published on May 3, 2011 (“the Notice”). The Department of the Treasury (“Treasury”), the Department of Labor (“DOL”) and the Department of Health and Human Services (“HHS”) have requested comment on several definitions and methods for determining the status of employees as part- or full-time, the result of which may subject an employer to an assessable penalty. The Notice also requests comment on the time-frame employers should use for determining the status of their employees, and therefore whether the employer is subject to an assessable payment under § 4980H of the Internal Revenue Code (“Code”).

BRT strongly supports a number of the proposals contained within the Notice, and applauds the Agencies for their coordinated efforts on developing these proposals. BRT is encouraged by the Agencies’ understanding of the crucial need for employer flexibility, as demonstrated in the Notice. We also encourage the Agencies to adopt regulations that are consistent with current classifications and methods that employers use today to determine the status of eligible employees who may be offered coverage. We do not believe it is necessary to create overly burdensome rules that may increase not only the cost of coverage, but the cost of compliance.

We would encourage the Agencies to incorporate into any proposed rule the recommendations presented below. Specifically, we address the following core issues: Process for Determination of Employee Status. The look-back/stability period under Section V provides a workable framework in determining an employee’s full-time status. The flexibility that is outlined in the Notice is critical for many employers who have varying weekly or monthly schedules. This flexibility should also apply to certain new employees. Dependent coverage. The voluntary offering of dependent coverage is a critically important interpretation of the statutory requirements under the law that is necessary to avoid disruptions in employer-sponsored coverage. Ongoing Employee Eligibility Determinations. The proposal should permit employers to retain flexibility with respect to existing employees, and allow employers to presume that certain classes of employees - such as salaried employees - qualify as full-time, and therefore not require that employers engage in the determination process with respect to these employees. Determinations for Part-Time Employees. The Agencies should provide employers with sufficient stability by ensuring that part-time employees are not subject to the same requirements as full-time employees. 90-day waiting period. In order to maximize employer flexibility, employers should be permitted to establish an appropriate eligibility timeframe, such as the look-back stability period safe harbor or use the 90-day waiting period, in order to determine eligibility to enroll under the terms of a group health plan. Challenges in certain employers offering of health insurance coverage as requested in Section VI.

I. Process for Determination of Employee Status/Look-back/Stability Period Safe Harbor

In the Notice, an applicable large employer’s assessment for a penalty is derived from the number of full-time employees employed for a given month, which is compared to the number of full-time employees who have received a premium tax credit. Under the proposed look-back/stability period, an employer could elect a time frame of not less than three months and not more than twelve months (as determined by the employer), to determine whether the employee averaged at least 30 hours of service per week (or 130 hours of service per calendar month). If the employee is a “full-time” employee during the proposed look-back period, then the employee would be treated as a full-time employee during a subsequent “stability period” of at least six months, but not longer than one year, regardless of the number of hours of service during this time, so long as the employee was still employed.

BRT supports this method for calculating hours of service, and believes it is a practical way, coupled with other options laid out in the Notice, for employers to determine which individuals are full-time employees. This approach provides stability for employers by taking into account those individuals who work on a flex time schedule, who are seasonal or temporary workers, or who would otherwise fall in and out of full-time status. This look-back and stability period should be permitted, but not required, as an option for employers in cases where an employer believes that a certain category of worker is full-time and the record-keeping is not necessary.

The method provided for in the Notice is clear, and coincides largely with processes already being used by many employers who have employees that work varied hours on a weekly or monthly basis. We agree with the Notice’s statement that a determination of full-time employee status on a monthly basis may cause practical difficulties for employers, employees, and the State Exchanges. To ensure stability in the workplace and the offering of health insurance coverage, employers also need the proposed flexibility.

In addition, the Notice suggests using existing Labor regulations1 to calculate hours of service, which would include hours for which an employee is paid or entitled to payment but performed no duties, such as due to vacation, holiday, illness, and incapacity  including disability. The Agencies propose to include an exception to the entitled payment rule under § 4980H so that no more than 160 hours of service would be counted for an employee on account of any single continuous period during which the employee was paid or entitled to pay but performed no duties. BRT supports the inclusion of this exception, because without it, individuals taking long-term disability leave would have to continue to be counted as a full-time employees for the purposes of calculating the employer penalty. Therefore, BRT strongly urges Treasury and IRS to include this exception in any proposed rule.

For new employees who might not have been employed by the employer during the entire measurement period, or employees who move into full-time status during the year, we believe this same look-back/stability period is equally important. An employer should be permitted flexibility to establish uniform look-back and stability periods for new hires to ensure the eligibility of the coverage period in determining whether the employee meets the 130 hour per month requirement.

In addition, we support proposals to permit employers to provide different stability periods for different groups of employees depending on the point during the plan year in which the employee is determined to be full-time. This would then permit employers to use timeframes such as date of hire or first date of the month. For certain employers who may have high turnover and a large portion of part-time employees for certain categories of workers, they may need different measurement and stability periods.

II. Ongoing Employee Eligibility Determinations

It is equally important that any proposed rule recognize the need to allow uniquely situated trades and employers to administer their benefits programs in a manner that does not create significant administrative burdens and costs, or instability in employers’ workforces and insurance plans. The Notice suggests that non-hourly employees would be subject to calculation of hours based on current Labor regulations2, modified through prior guidance with respect to other provisions of the ACA. However, BRT requests that any proposed rule recognize that there may be some classes of employees, such as those who are salaried, that employers should be permitted, but not required, to include in any determination processes. Such employees could presumptively be considered full-time by employers. Conversely, some employees can clearly be presumed to be part-time, based on the hours or purpose for which they were hired, without any determination required. Allowing employers to exempt certain classes of employees from any determination requirements  so long as the assumptions on which such classifications are made are consistently applied  will ensure that administrative burdens and expenses imposed on employers do not expand unnecessarily, and ensures stability in the workforce.

For example, in the Notice, seasonal employees who work less than 120 days are not treated as full-time employees for purposes of calculating who is a large employer. We believe this test should be permitted also in determining whether an employee is a full-time employee and subject to an assessable penalty if they work less than 120 days and are in a seasonal job classification. This test or the look-back/stability safe harbor test should be permitted in order to maximize flexibility and minimize administrative complexity.

III. Dependent Coverage

The ACA’s shared responsibility provisions are commonly understood to apply only to the offering of coverage to full-time employees and BRT strongly supports this interpretation and is concerned that alternative interpretations may cause disruption in employer sponsored coverage.

Of concern is that Notice 2011-36 indicates that employers would be liable for an assessable payment under § 4980H if either “(1) the employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage (MEC) under an eligible employer-sponsored plan or (2) the employer offers its full-time employees (and their dependents) the opportunity to enroll in MEC under an eligible employer-sponsored plan that, with respect to a full-time employee who has been certified for the advance payment of an applicable premium tax credit or cost sharing reduction, either is unaffordable within the meaning of §36(B)(c)(2)(C)(i) or does not provide minimum value within the meaning of §36(B)(c)(2)(C)(ii) (§ 4980H(b) liability)” and any full-time employee is then certified to receive a premium tax credit or cost-sharing reduction. As structured in the notice, this would appear to subject employers to liability for not offering dependent coverage.

The statute clearly, and in its totality, requires the offering of coverage solely to full-time employees, which is particularly clear when these provisions are read as a whole and viewed alongside the assessment of the penalty and the evaluation of the premium calculation for self-only coverage3. BRT supports the voluntary offering of dependent coverage by employers who opt to offer such coverage. The parenthetical clause “(and their dependents)” merely provides for the possibility that an employer may satisfy the requirement to offer coverage to full-time employees by offering either individual or family coverage.

Furthermore, if the parenthetical “(and their dependents)” is read as a requirement as suggested in the Notice, then the shared responsibility provisions of § 4980H would not apply to employers that offer coverage only to full-time employees. Under such an interpretation, the shared responsibility provisions of § 4980H would apply to only two class of employers: (1) Under § 4980H(a), those employers that fail to offer coverage to full-time employees and their dependents; and (2) Under § 4980H(b), employers that offer coverage to full-time employees and their dependents. If read in this way, there is no third category of employers that offer coverage only to their full-time employees and not to dependents, and this would mean that the requirements of this section would not apply to them. It should be clear that this is not a correct reading of the statute and not what Congress intended. Accordingly, this is additional and very clear evidence that Congress intended § 4980H to require the offering of coverage solely to full-time employees, otherwise this third class of employers would have been included to avoid such a result.

Therefore, when evaluated in its totality, § 4980H requires that employers offer coverage solely to their full-time employees in order to avoid the penalty under § 4980H(a). BRT believes this is consistent with Congressional intent.4 If the language is interpreted to require the offering of family coverage or the offering of affordable family coverage, we believe it is inconsistent with the statutory requirements and could result in a significant disruption in employer-sponsored coverage.

IV. Determinations for Part-Time Employees

The Notice requests comments on § 2708 which provides that a group health plan and health insurance issuer offering group health insurance coverage shall not apply any waiting period, that exceeds 90 days. Regarding the application of this requirement to part-time employees, BRT believes that Congress did not intend to apply the 90-day waiting period requirement to plans covering part-time employees. BRT believes that if § 2708 is interpreted to apply to coverage for part-time employees that this could cause a decline in the number of employers who voluntarily offer coverage to part-time employees. As a result, it is important that regulations implementing these requirements not apply to plans covering only part-time employees.

Alternatively, if regulations implementing § 2708 are applied to plans covering only part-time employees, then BRT believes that any waiting period should begin when the part-time employee has satisfied any other permissible eligibility requirements by the employer, including service requirements.

The employer responsibility requirements in the ACA should apply only to full-time employees. There is no penalty for not providing coverage to part-time employees. There are, however, cases in which an employer may wish to offer part-time employees health coverage under a group health plan provided to full-time employees. In these instances, the employer typically requires that parttime employees work for a period in excess of 90 days before becoming eligible for the health plan coverage. This additional waiting period is important to the stability of the plan because the typical part-time employee may not stay in this status for a long period, and the waiting period allows an employer to manage the costs associated with providing coverage to its employees. It is for these important considerations that employers may require part-time employees to work longer than 90 days before becoming eligible for health coverage.

If a shorter waiting period is imposed on part-time employees who are not required to be covered under the ACA, this will significantly increase an employer’s health plan costs and provide a strong incentive for these employers to cease offering this valuable coverage to part-time employees. This incentive runs counter to the spirit and objective of the ACA. Accordingly, BRT strongly believes it is appropriate and consistent with the ACA to permit a longer waiting period with respect to part-time employees.

V. 90-DayWaiting Period

Additionally, with regard to § 2708, as described in the Notice, there are three similar regulations that define “waiting period” as “the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective (emphasis added).”5

We believe that “who is otherwise eligible” permits two distinct periods of time: a look-back period and a waiting period for those employees where eligibility for the plan is based on a classification or an hourly determination of full-time employment. Employers should have flexibility in determining the totality of the eligibility period, waiting period, and an administrative period relating to enrollment for new employees. In these instances, the totality of the time frame could range between 3 months to 12 months which we believe is consistent with other provisions in the Notice.

VI. Challenges in certain employers offering of health insurance coverage as requested In Section VI.

We appreciate the comment in the Notice that the proposed regulations would make clear that an employer offering coverage to all, or substantially all (emphasis added), of its full-time employees would not be subject to the § 4980H(a) assessment payment provisions. This is an important caveat to encourage the offering of employer-sponsored coverage and recognizes that there are likely to be some instances where certain employees may have been eligible for coverage.

Conclusion

We appreciate the opportunity to respond to this Notice. Again, BRT believes that both as a matter of law and policy, our employers and employees are best served by a proposed rule that permits the most flexibility and stability for employers. Today, a majority of employers do offer health insurance coverage and we believe the rules implementing these provisions should be done in a way that is consistent with current employer practices. We are available to respond to any questions regarding these comments.

Sincerely,

Maria Ghazal
Director, Public Policy and Counsel
Business Roundtable

1 29 C.F.R. § 2530.200b-2(a)

2 29 C.F.R. § 2530.200b-2(a)

3 Provisions that demonstrate the assessable penalty is applied only to offering full-time employees with coverage:

§ 4980H(a) states: If- (1) any applicable large employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and (2) at least one full-time employee of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the applicable payment amount and the number of individuals employed by the employer as full-time employees during such month. (emphasis added)

§ 4980(H)(b) states: “(1) IN GENERAL. -If- (A) an applicable large employer offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan (as defined in section 5000A(f)(2)) for any month, and (B) 1 or more full-time employees of the applicable large employer has been certified to the employer under section 1411 of the Patient Protection and Affordable Care Act as having enrolled for such month in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee, then there is hereby imposed on the employer an assessable payment equal to the product of the number of full-time employees of the applicable large employer described in subparagraph (B) for such month and an amount equal to 1/12 of $3,000. (emphasis added)

Provisions that demonstrate the determination of affordability is applied to self-only employee coverage: Section 36(B) (c)(2)(C) provides: “(C) SPECIAL RULE FOR EMPLOYER-SPONSORED MINIMUM ESSENTIAL COVERAGE.-For purposes of subparagraph (B)- (i) COVERAGE MUST BE AFFORDABLE.-Except as provided in clause (iii), an employee shall not be treated as eligible for minimum essential coverage if such coverage- (I) consists of an eligible employer-sponsored plan (as defined in section 5000A(f)(2)), and (II) the employee’s required contribution (within the meaning of section 5000A(e)(1)(B)) with respect to the plan exceeds 9.5 percent of the applicable taxpayer’s household income. This clause shall also apply to an individual who is eligible to enroll in the plan by reason of a relationship the individual bears to the employee. (emphasis added).

Provisions that define “required contribution” for self-only coverage states: (B) REQUIRED CONTRIBUTION.-For purposes of this paragraph, the term ‘required contribution’ means- (i) in the case of an individual eligible to purchase minimum essential coverage consisting of coverage through an eligible-employersponsored plan, the portion of the annual premium which would be paid by the individual (without regard to whether paid through salary reduction or otherwise) for self-only coverage. (emphasis added)

(C) SPECIAL RULES FOR INDIVIDUALS RELATED TO EMPLOYEES.-For purposes of subparagraph (B)(i), if an applicable individual is eligible for minimum essential coverage through an employer by reason of a relationship to an employee, the determination under subparagraph (A) shall be made by reference to required contribution of the employee.

4 Senator Baucus, Chairman of the Senate Finance Committee, is widely recognized as the author of the employer responsibility provision. From the earliest days of this proposal, the absence of any reference to dependents in the context of this provision has been consistent. See, e.g., Senate Finance Committee Summary of America’s Health Future Act, October 13, 2009; see also, Baucus, A Framework for Comprehensive Health Reform. The Senate Finance Committee's Report on the predecessor to the ACA, America’s Health Future Act, states that "[a]ny employer with more than 50 employees that does not offer coverage for all its full-time employees, does not provide coverage that is affordable, or does not provide coverage with an actuarial value of at least 65 percent, is required to pay a penalty." Senate Finance Committee Report, America’s Health Future Act, October 19, 2009, 55 (emphasis added). The word "dependent" does not appear in any part of the text of the Committee Report's discussion of employer-provided health insurance coverage, except for in a single footnote - which explicitly differentiates rules for deducting as business expenses the cost of "employer-provided health coverage" from the rules "for the deductibility of contributions to welfare benefit plans with respect to medical benefits for employees and their dependents." Id., at 54. This note clearly highlights the underlying intent of the Committee to consider only that coverage which is offered to employees when determining whether an employer has met its shared responsibility. Furthermore, with respect to the determination of "unaffordable coverage," the Committee Report goes on to state that if "an employee is offered unaffordable coverage by their employer or coverage with an actuarial value of less than 65 percent, however, the employee can be eligible for the premium tax credit." Id., at 56. Again, the focus has consistently remained solely on the coverage offered to the employee alone.

5 Treas. Reg. §54.9801-3(a)(3)(iii); DOL Reg. 29 CFR 701(a)(3)(iii); HHS Reg. 45 CFR 146.11(a)(3)(iii).