The Obama Administration has released formal guidance on the delay of the Affordable Care Act's (the "ACA") employer mandate and certain reporting requirements.
Executive Summary: The Obama Administration has released formal guidance on the delay of the Affordable Care Act's (the "ACA") employer mandate and certain reporting requirements.
Background
Under the ACA's employer mandate, an employer with 50 or more full-time employees generally must offer minimum essential health coverage that provides minimum value and is affordable to its full-time employees or it will be assessed a penalty (the shared responsibility payment) if one or more full-time employees obtains coverage from a state or federal health insurance exchange and is eligible for a subsidy or cost-sharing reduction. Sections 6055 and 6056 of the Internal Revenue Code ("IRC") require employers to report information about the health coverage offered to their full-time employees. The IRS plans to utilize employer reporting under IRC §§ 6055 and 6056, among other things, to determine whether the employer will be assessed a penalty under the employer mandate.
Transition Guidance
On July 9, 2013, the IRS issued Notice 2013-45, http://www.irs.gov/pub/irs-drop/n-13-45.PDF, which delays reporting under IRC §§ 6055 and 6056, and consequently, the penalties under the employer mandate until 2015. Among other things, the Notice provides that:
- Proposed rules for reporting under §§ 6055 and 6056 are expected to be released later this summer.
- Information reporting under §§ 6055 and 6056 will not be required until 2015; however, once the information reporting rules have been issued, employers, insurers, and other reporting entities are encouraged to voluntarily comply with the rules in 2014.
- No penalties will be imposed for failure to comply with the information reporting provisions in 2014.
- Because the transition relief (i.e. the delay in the reporting requirements) makes it impracticable to determine which employers will owe a penalty under § 4980H, no penalties will be assessed for 2014.
- The transition relief for §§ 6055 and 6056 reporting and the employer shared responsibility provisions has no effect on the other provisions of the ACA such as the premium tax credit and individual responsibility provisions.
The Bottom Line: Employers who fail to offer minimum essential coverage that provides minimum value and is affordable to its full-time employees under the ACA's employer mandate in 2014 will not be subject to a penalty. The penalty is expected to apply starting on January 1, 2015. Employers must still comply with the other provisions of the ACA, including requirements regarding the type of coverage that must be provided (such as women's preventive care and the elimination of pre-existing condition exclusions), Form W2 Reporting and distribution requirement such as distributing a Summary of Benefits and Coverage and Notice of Coverage Options.
If you have any questions regarding this Alert, please contact Tiffany Downs, tdowns@fordharrison.com, Isabella Lee, ilee@fordharrison.com, Scott Wagner, swagner@fordharrison.com, any member of FordHarrison's Employee Benefits Practice Group, or the FordHarrison attorney with whom you usually work.