Mandatory Auto Enrollment Effective Date

[FishOn]

Admittedly, the more I read about the MAE and when a small business crosses over the 10 employee threshold, the confused I become. If a plan was adopted and effective 1/1/2023, but hires the 11th employee on 4/1/2025, is the effective date when the plan has to add MAE 1/1/2027?  

[Belgarath]

Any chance the document was SIGNED prior to 12/29/22? Assuming not, then assuming plan and fiscal year are calendar, I agree with your effective date - that is, applies the first plan year that begins at least 12 months after the close of the first taxable year with respect to which employer normally employs more than 10 employees. If any of these employees are part time, then you get into a pro-rated calculation depending upon hours worked - for example, an employee who works 6 hours counts as 3/4 of an employee, 2 hours counts as 1/4 employee. As I recall, IRS came up with this calculation methodology from the COBRA regs. Great fun.

[Peter Gulia]

The rule Belgarath points you to is for counting employees and fractions of employees, and their work periods (counted in workweeks or workdays), to determine whether an employer’s health plan must or not need not offer Federal COBRA continuation coverage.

Consider that the referred-to rule does not count nonemployee contractors and does not self-employed individuals.

For example, if a limited-liability company (that elects Federal income tax treatment as a partnership) has, for all work periods in a measurement year, ten full-time workers but two of them are members (partners) of the LLC, the company has eight employees.

https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4980B-2

In this note, I say nothing about whether anyone must, may, or must not rely on the Treasury’s proposed interpretation of Internal Revenue Code § 414A.