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PACE Act Impacts Small Employers

On October 1, 2015, Congress passed the Protecting Affordable Coverage for Employees (PACE) Act. PACE repeals the mandated expansion of the definition of “small employer” under the Affordable Care Act from 50 to 100 employees.

Previously, the Affordable Care Act had included a provision changing the definition of a “small employer” from 50 or fewer employees in 2015 to 100 or fewer employees for 2016.  For employers, this means that in states that choose to continue to define small group as up to 50 employees, such as Indiana, “mid-sized” employers (51-100 employees) will be able to avoid the potential increase in premiums that could result from being designated a small employer.

Importantly, however, the PACE Act does not affect definitions of large and small employer for purposes of the employer mandate. Employers with 50 or more full-time equivalent employees will still generally be required to offer affordable health coverage to their employees. Instead, PACE affects the definition of small employer for purposes of group market reforms, which require small group policies to meet certain requirements, including those related to benefit coverage, actuarial value, and premium rating restrictions.

Employers with 51-100 employees should consult with their insurance advisors and legal counsel while continuing to monitor developments in this area, as future action from state regulators and insurance carriers could impact what steps should be taken.

If you have questions about the PACE Act or it’s implications on your business, please contact attorney Steve Theising at stheising@KDDK.com or (812) 423-3183, or contact any member of the KDDK Tax and Employee Benefit Practice Team.

About the Author

Steven M. Theising, Indiana Attorney

Steve Theising

Steven M. Theising, an attorney at Kahn, Dees, Donovan & Kahn, LLP (KDDK), in Evansville, Indiana, practices primarily in the areas of business, construction, real estate, tax and employee benefits, and collection and creditors’ rights law. Steve utilizes his accounting and financial background to provide both legal and practical business analysis in negotiating, resolving and closing business, construction and real estate transactions and disputes. He also assists clients with addressing and resolving environmental and estate planning issues.