Health Care Reform Update: Feds Issue Transition Relief for Employer Mandate Delay
The employer shared responsibility mandate, a key piece of the sweeping health care reform enacted in 2010 and scheduled to go into effect in 2014, is officially postponed until 2015.
In an announcement on July 2, 2013, President Barack Obama’s administration delayed for a year the Patient Protection and Affordable Care Act (ACA) reporting requirement that employers offer proof of qualifying employee health care coverage, citing employer compliance concerns as the basis for the delay. Because an additional year is provided before employer reporting requirements begin, the employer shared responsibility mandate will not be enforced until 2015, and penalty payments for noncompliance will not be assessed in 2014.
The Internal Revenue Service (IRS) issued transition relief for 2014 for the delay in the form of a notice on July 9, 2013.
Overview of the Employer Shared Responsibility Mandate
Generally, the ACA requires “large” employers of 50 or more full-time employees to offer full-time employees the opportunity to enroll in an employer-sponsored minimum essential coverage health care plan that meets minimum value and affordability standards or be assessed a penalty for employees receiving a premium tax credit or cost-sharing reduction to obtain health care coverage.
The employer shared responsibility mandate requires annual information reporting by large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees.
The employer shared responsibility provisions had an effective date of January 1, 2014.
Information Reporting and Penalties Postponed Until 2015
Guidance issued by the IRS specifies that information reporting regarding health insurance is optional for employers for 2014, and employers are not subject to penalties for failure to comply with information reporting provisions for 2014.
According to the IRS, this transition relief will provide “additional time for input from employers and other reporting entities in an effort to simplify information reporting consistent with effective implementation of the law… It will also provide employers, insurers, and other reporting entities additional time to develop their systems for assembling and reporting the needed data.”
Information Reporting Delay Postpones Employer Shared Responsibility Provisions
Employer shared responsibility penalty payments will not be assessed for 2014 because information reporting is fundamental to the administration of the employer shared responsibility provisions and necessary to determine which employers owe the payments for the year.
After receiving the required information returns filed by large employers and the information about employees claiming the premium tax credit for a calendar year, the IRS determines whether any of the employer's full-time employees received the premium tax credit and, if so, whether an assessable payment may be due. Ordinarily employers don’t know whether a full-time employee received a premium tax credit, and therefore aren’t required to calculate a payment or file the returns to submit a payment. Rather, if the IRS concludes that an employer may owe an assessable payment, it will contact the employer, and the employer will have an opportunity to respond to the information the IRS provides before a payment is assessed.
Because of the integral role that information reporting plays in determining which employers owe shared responsibility payments, no employer shared responsibility payments will be assessed for 2014.
The transition relief through 2014 for the information reporting and employer shared responsibility provisions has no effect on the effective date or application of other ACA provisions. The unaffected provisions include the individual shared responsibility mandate and individuals’ eligibility for the premium tax credit for enrolling in a qualified health plan through insurance exchanges (also called marketplaces) if their household income is within a specified range and they are not eligible for other minimum essential coverage—including an eligible employer-sponsored plan that is affordable and provides minimum value.
In addition, employers covered by the Fair Labor Standards Act (FLSA) are still required to provide employees with written notice regarding the health insurance exchanges and the health care coverage available through them. Notice is required whether or not an employer offers employees health care coverage. Consult our article, “Health Care Reform Requires Employers to Provide Insurance Exchange Notice” for guidance in complying with the notice requirement, which is in effect as of October 1, 2013.
The IRS expects to publish proposed rules for the information reporting provisions in the summer of 2013 and encourages employers to voluntarily comply for 2014 with the information reporting provisions once the rules have been issued. The IRS also recommends employers maintain or expand health coverage in preparation for the application of the employer shared responsibility provisions beginning in 2015.
Stay tuned for further developments...