IRS Employer Mandate Delay Includes Clarification on Volunteers
February 27, 2014 03:54 PM
Under a final Internal Revenue Service (IRS) rule recently issued, the Obama Administration further delayed part of the Affordable Care Act (ACA) requiring employers to provide health insurance for their workers. Employers that have fewer than 100 full-time workers will have one extra year - until 2016 - before the employer mandate takes effect. Companies that have fewer than 50 workers are already exempt from the requirement to cover their employees. Employers of more than 100 full-time employees will need to cover 70 percent of their full-time employees in 2015 and 95 percent in 2016 or later or face a penalty. For more on the IRS’ Final Rule, please see NAHC Reporton February 12, 2014.
Also included in the rule is commentary and clarification regarding the application of the ACA employer mandate requirements to volunteer workers. In recent months, media reports regarding whether or not organizations would be required to count the hours of volunteers - such as volunteer firefighters - in their determination of the applicability of the ACA employer mandate have raised concerns in the hospice community relative to treatment of hospice volunteers because under some hospice regulations volunteers are the equivalent of employees.
IRS’ final rule provides some useful information that helps to clarify that, for purposes of the ACA, an hour of service is “generally defined as an hour for which an employee is paid or entitled to payment.” Following are a few excerpts from the preamble to the final rulethat discuss volunteer hours:
Commenters requested that 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 section 4980H. Under the definition of hour of service outlined in these regulations, an hour of service is generally defined as an hour for which an employee is paid or entitled to payment. Accordingly, 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 [emphasis added].
Commenters noted, however, that some volunteers receive compensation in the form of expense reimbursements, stipends, contributions to employee benefit plans, or nominal wages. Local governments, for instance, noted that many volunteer firefighters or other emergency responders are paid a salary or an hourly wage, generally at a rate lower than the rate paid to non-volunteers performing services in a similar capacity. Other volunteer firefighters or emergency responders may receive expense reimbursements or other fees each time they respond to a call. Commenters generally expressed concern that volunteer service would be discouraged if volunteer hours were required to be counted when determining whether the individual is a full-time employee for purposes of section 4980H.
In response to these concerns, the final regulations provide that hours of service do not include hours worked as a “bona fide volunteer.” For this purpose, the definition of “bona fide volunteer” is generally based on the definition of that term for purposes of section 457(e)(11)(B)(i), which provides special rules for length of service awards offered to certain volunteer firefighters and emergency medical providers under a municipal deferred compensation plan. For purposes of section 4980H, however, 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.