United States: IRS/Treasury Provides One-Year Delay For Certain Employer Health Coverage Reporting And Employer "Pay Or Play" Penalty Taxes

Employer Health Coverage Reporting and Employer "Pay or Play" Penalties Delayed

On July 9, 2013, the U.S. Treasury Department and Internal Revenue Service ("IRS") issued formal guidance (IRS Notice 2013-45; herein, the "Notice")1 that provides for a one year delay until 2015 with respect to (i) certain information reporting requirements imposed on employers and others that provide health coverage to employees and (ii) the assessment of excise tax penalties on certain employers under the employer "pay or play" mandate (also known, more formally, as the "employer shared responsibility penalty").2 Prior to the announcement of this one year delay, such information reporting and employer penalty rules were scheduled to apply in 2014. Accordingly, employers will now have more time to develop appropriate recordkeeping and reporting systems in order to comply with the reporting requirements in 2015, and to review and, as appropriate, modify their health plans to avoid employer shared responsibility penalties that are scheduled to begin in 2015.

Employer Shared Responsibility Penalty Reporting

Under the Patient Protection and Affordable Care Act, as amended ("ACA"), each employer subject to the employer shared responsibility penalty rules (i.e., an employer that employs an average of at least 50 full-time employees, including "full-time equivalent employees," on business days during the preceding calendar year (known as an "applicable large employer")) is required to file an annual return with the IRS that reports the terms and conditions of the health care coverage provided to the employer's full-time employees for the year. The information reported includes whether the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential health coverage under an employer-sponsored plan and, if it does, the length of any eligibility waiting period, the months during the calendar year when coverage under the plan was available, the monthly premium for the lowest cost option in each coverage category under the plan, employer's share of the total allowed costs of benefits provided under the plan, and for each full-time employee the months during which the full-time employee (or any dependents) were covered under the employer-sponsored plan. Further, applicable large employers will need to furnish to each full-time employee whose information is required to be reported to the IRS by such employer a written statement that includes the employer's contact information and information relating to health plan coverage provided to the particular employee (and his/her dependents) that is required to be reported in the report to the IRS.

Minimum Essential Coverage Reporting

In addition, under the ACA, employers that sponsor self-insured health plans, health insurance issuers, government agencies and other persons offering minimum essential health coverage (collectively, "health reporting entities") are required to file annual information returns with the IRS reporting information for each individual for whom minimum essential health coverage is provided by such reporting entity. Such information returns must contain, among other things, information concerning the name and taxpayer identification number of the primary insured and each other individual covered by the policy or plan, dates each such individual was covered, whether the coverage was offered through the health exchanges and the portion of the health coverage premium paid by the employer.

Each health reporting entity is required to furnish a written statement to each individual listed on the information return that shows the information reported on such return that relates to such individual. Prior to the issuance of the transition relief under the Notice, the above reporting requirements were scheduled to become effective in 2014.

Employer Shared Responsibility Penalty

Under the employer shared responsibility penalty rules, an applicable large employer may be subject to an excise tax penalty if one or more of the employer's full-time employees obtains a premium cost subsidy with respect to exchanged-based health coverage and either (i) the employer fails to offer health plan coverage to a sufficient number of its full-time employees (and their dependents) or (ii) offers health plan coverage to a sufficient number of full-time employees (and their dependents) but such coverage is deemed "unaffordable" or fails to provide a prescribed "minimum value" of benefits. The actual penalty calculation depends on the number of full-time employees of an employer and the number of full-time employees who receive subsidized exchange-based coverage and whether the employer "fails to offer coverage" or "offers coverage that is unaffordable or fails to provide minimum value."

Transition Relief

The Notice provides that the above-described information reporting requirements will not apply for 2014. Instead, they will first apply in 2015. Although the reporting requirements are deferred until 2015, the IRS encourages entities to voluntarily comply with the information reporting requirements in 2014 in order to facilitate their preparation for formal required compliance in 2015.

Because the information reporting requirements are a key element in enabling the IRS to determine whether an employer's employees are eligible for and the appropriate amount of an exchange-based subsidy and, in turn, whether the employer is subject to an employer shared responsibility penalty, the Notice provides that no employer shared responsibility penalties will be assessed for 2014. Thus, the employer penalty rules are instead now scheduled to apply beginning in 2015.

The Notice makes clear, however, that access to the health plan exchanges and to exchange-based premium subsidies are unaffected by the transition relief granted and thus eligibility for such subsidies will begin in 2014. Moreover, the Notice states that the transition relief in 2014 with respect to information reporting and employer shared responsibility penalties has no effect on the effective dates or application of other ACA provisions (e.g., the "individual pay or play" health coverage mandate; provision of notices describing the health plan exchanges (see our prior Alert found here) and summaries of benefits and coverage).

Next Steps for Employers

The one year delay of the effective date with regard to certain information reporting and assessment of employer shared responsibility penalties is certainly welcome news for employers trying to timely comply with the myriad of requirements under the ACA. While the extra year to meet the information reporting requirements is helpful (e.g., initial information statements for employees are now due, for 2015, by January 31, 2016, instead of, for 2014, by January 31, 2015), employers should still be proactive in getting ready to comply with the information reporting requirements in 2015 and in structuring their employer-sponsored health plans to avoid the imposition of employer shared responsibility penalties (unless they have decided not to do so).

Accordingly, we suggest that employers continue in their preparations to comply with the information reporting requirements, though such employer actions may reflect the newly granted one-year delayed effective date. With respect to the one year delay in the assessment of employer shared responsibility penalties, employers may wish to consider (or reconsider) the following:

  • Have changes to the employer's health plan been made or are they intended to be made later this year to avoid employer shared responsibility penalties in anticipation of the original (pre-transition relief) 2014 effective date?
  • Such changes may include (i) eligibility based on a minimum 30 hours of service per week standard, (ii) reducing the employee's share of the premium cost for employee-only coverage to meet the employer penalty rules' "affordability" requirement, (iii) reducing employee hours of service below 30 hours per week (to avoid full-time employee status), and (iv) eliminating employer-provided health coverage entirely. In light of the one year delay in applying the employer shared responsibility penalty rules, employers may wish to reconsider such actions taken or contemplated for 2014.
  • Establishment of look back measurement periods and related stability periods for purposes of determining which employees are "full-time employees" for employer shared responsibility penalty purposes can now be deferred to next year. It is not clear, however, whether special transition rules previously provided to employers in making such initial measurement period determinations for 2014 will be permitted for the initial employer penalty year in 2015. Hopefully, the IRS will issue guidance in this regard.
  • As the determination of "applicable large employer" status is not relevant for 2014, employers need not track the status (and hours of service) of its "full-time equivalent employees" (i.e., part-time employees) in 2013.

Conclusion

The one year reprieve from the IRS with respect to information reporting and employer shared responsibility penalties allows employers to catch their breath concerning two important ACA employer provisions. However, preparing for compliance with these reporting and employer penalty requirements is still on the horizon and therefore appropriate actions need to be taken to permit timely compliance in 2015. In addition, many other ACA requirements are still effective in 2014 so employers must stay diligent this year in order to satisfy such ACA requirements. Please contact any of the attorneys listed below if you have any questions concerning the impact of the special one year delay transition relief under the Notice or would like assistance with respect to the impact of any of ACA's requirements.

Footnotes

1 The Notice can be found at: http://www.irs.gov/pub/irs-drop/n-13-45.PDF

2 For a detailed discussion of the employer shared responsibility penalty rules, please see our Alert dated March 2013, which can be found here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Foley & Lardner
Proskauer Rose LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Foley & Lardner
Proskauer Rose LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions