On Monday, the IRS issued final regulations regarding the implementation of the employer shared responsibility provisions under the Affordable Care Act (the ACA), otherwise known as the “pay or play” rules. The final regulations provide some helpful guidance and welcome relief to employers. For higher education institutions, the final regulations provide concrete guidance on how to count the hours of adjunct faculty and student workers. The IRS also provided transitional relief for all employers and delayed enforcement of the rules for medium-sized employers (employers with 50-99 full-time employees).As an overview, the ACA’s pay or play rules require that employers with 50 or more full-time employees provide these full-time employees with health coverage that is both affordable and provides minimum value. An employer who either fails to provide health coverage, or provides health coverage that does not meet the affordability or minimum value requirements may be subject to tax penalties.Counting Employee Hours for Determining Full-Time StatusUnder the final regulations, a full-time employee continues to be defined as one who works an average of at least 30 hours per week or 130 hours each month. For higher education institutions and employers with volunteer employees, however, the final regulations provide welcome guidance with regard to counting hours worked by adjunct faculty, student workers, and volunteer employees.Although the regulations continue to allow higher education institutions to use any reasonable method to count adjunct faculty hours, the regulations also provide a safe harbor authorizing institutions to credit adjunct faculty members with 2.25 hours of service for each hour they are assigned to teach. Stated differently, regardless of how much time an adjunct actually spends preparing for class or grading assignments, an institution may credit an adjunct faculty employee with 1.25 extra hours of work for such tasks for each hour of classroom teaching time. This safe harbor will allow institutions to easily account for non-teaching but course-instruction related tasks, which are administratively difficult to track. If an institution uses this safe harbor, an adjunct faculty member would definitely reach the 30-hour threshold by teaching in excess of 13 hours per week. Thus, any adjunct teaching 14 or more credit hours at any one time must be considered a full-time employee.In addition to the 2.25 hour teaching time calculation, the regulations make it clear that an institution must also count any other time that an adjunct faculty member is required to work on other tasks unrelated to course instruction. For example, the institution must count the actual time that the instructor spends in office hours or in required administrative functions such as faculty meetings. Thus, adjuncts may need to be assigned fewer than 13 teaching hours per week to avoid qualifying as a full-time employee. The IRS said that it may issue further guidance on counting adjunct faculty hours, but that this safe harbor can be used through at least 2015.Regarding student workers, the final regulations provide that higher education institutions do not need to count student work-study hours or the hours of students working in unpaid internships. The IRS cautioned that institutions will still need to track and count hours worked by students participating in paid internships or other paid work opportunities. The regulations also briefly address the issue of student workers, such as resident assistants, who are required to be on call during certain hours. The regulations state that an institution must use a reasonable method to calculate hours worked by employees who are required to be on call but clarified that any arrangement that does not track any on-call hours would be unreasonable.Beyond the higher education area, the final regulations relieve all employers of the obligation to track and count volunteer worker hours. This would include volunteer firefighters or emergency responders providing services to local governments and tax exempt agencies.Delay in Effective DateThe final regulations delay the compliance effective date further for certain medium-sized employers and offer a phase-in approach for all other employers. Specifically, medium-sized employers with between 50 and 99 employees will not need to comply with the pay or play rules until January 1, 2016, provided they meet certain requirements. To take advantage of the delay, a medium-sized employer may not take steps to qualify for the delay by reducing the size of its workforce. Also, a medium-sized employer must generally maintain the health coverage that it provided to its employees as of February 9, 2014.Employers with 100 or more employees remain subject to the rules starting in 2015 but these employers are only required to offer coverage to 70% of their full-time employees in 2015 without triggering the largest tax penalties. Starting in 2016, all employers will be required to offer coverage to 95% of their full-time employees to avoid triggering tax penalties.Final Guidance Coming on Employer ReportingThe pay or play rules will require employers to report certain employee coverage information to the IRS. These reporting requirements will go into effect in 2015 for employers with 100 or more employees. Based on the proposed reporting requirements, we had expected the final reporting requirements to be fairly onerous. Fortunately, the IRS recently stated that it intends to streamline the final reporting requirements in guidance that it will publish in the near future. So, in addition to planning for compliance with the pay or play rules generally, most employers will also need to add a new reporting process before the end of 2014.