IRS Makes Shared Responsibility Delay Official
The delay of the Patient Protection and Affordable Care Act's (PPACA) employer reporting and shared responsibility provisions was made official by the Internal Revenue Service (IRS) through Notice 2013-45
, issued on July 9, 2013. As we reported in a Health Care Reform e-alert
on July 3, 2013, the delay was foreshadowed by blog posts on the U.S. Treasury Department and White House websites on July 2, 2013, which indicated that guidance would be issued within a week. Unfortunately, Notice 2013-45 does not provide answers to several important questions raised by the delay.
PPACA added two new reporting requirements to the Internal Revenue Code (the Code). New Code Section 6055 requires self-insured employer group health plans, insurers, and other providers of health coverage to report information to the IRS about whether individuals are covered under health coverage provided by the reporting entity. The purpose of this report is to help the IRS determine whether individuals are meeting their individual mandate obligations. Code Section 6056 requires large employers to report to the IRS information about the health insurance coverage the employer offers (or does not offer) to its full-time employees. The purpose of this report is to help the IRS determine whether the employer will be subject to PPACA's shared responsibility assessments (also known as the "employer penalty" or "pay-or-play" provisions).
Notice 2013-45 confirms that the information reporting requirements under Code Sections 6055 and 6056 will be optional for 2014 but will be fully effective for 2015. The IRS anticipates that proposed rules implementing these reporting requirements will be issued yet this summer and that this transition relief "will provide additional time for dialogue with stakeholders in an effort to simplify the reporting requirements." According to the IRS, the delay will "also provide employers, insurers and other reporting entities additional time to develop their systems for assembling and reporting the needed data."
Perhaps more importantly, the IRS confirmed that PPACA's employer shared responsibility provisions will also be delayed until 2015. According to the IRS, the information required by the delayed Code Section 6056 reporting requirement "is integral to the administration of the Employer Shared Responsibility Provisions" because this reporting provides the information necessary for the IRS to determine whether an employer is offering affordable, minimum value coverage to employees and whether an employer who is not doing so should be penalized. Because the Code Section 6056 reporting requirement is delayed, Notice 2013-45 states that the IRS will not assess employer shared responsibility payments for 2014. Nevertheless, the IRS encourages employers to voluntarily comply with the information reporting provisions for 2014 (once the reporting requirements have been issued), as well as to "maintain or expand health coverage" in 2014.
Notice 2013-45 also confirms that the individual mandate is not delayed and that individuals will still be eligible for the premium tax credit (or federal premium "subsidies") that will assist certain individuals to purchase health insurance coverage on health insurance exchanges (or "marketplaces") in 2014. In addition, the guidance makes clear that provisions of PPACA that are not explicitly addressed in Notice 2013-45 are not delayed
, such as the Patient Centered Outcomes Research Institute (PCORI) fee, the transitional reinsurance fee, new coverage mandates for self-insured employer group health plans and health insurers, the Exchange Coverage Notice distribution requirements, and the ongoing reporting of the value of health coverage on employees' Forms W-2. We detailed these ongoing obligations in our July 3 Health Care Reform e-alert
While the official announcement of the delayed information reporting requirements and employer shared responsibility obligations is welcome, there are many unanswered questions. For example, will new transitional measurement periods be announced or will employers have to begin look-back measurement periods for determining employees' full-time status as early as October 2013 for coverage that begins in 2015? Will additional delays be allowed for fiscal year (non-calendar year) plans that will allow such plans to delay shared responsibility requirements past Jan. 1, 2015? Will additional guidance regarding multiemployer plans, seasonal employees, adjunct faculty, staffing companies, and other areas currently subject to transitional rules, be issued in time for employers to consider in preparing for the delayed Jan. 1, 2015 effective date? We hope to receive guidance from the IRS over the coming weeks and months so that employers can take advantage of the delay in a constructive and timely manner.
In the meantime, employers subject to the shared responsibility provisions should use this delay to continue to implement ongoing parts of PPACA and to more carefully consider the implementation of the shared responsibility provisions by taking actions such as:
Considering alternative plan options and/or consolidations (including evaluating interest in "private" health insurance exchanges)
Evaluating whether fully-insured or self-insured health plan designs are desirable
Reviewing payroll and premium structures to ensure coverage will be affordable by 2015, to mitigate potential loss of premium income from employees, and to coordinate those changes with payroll departments
Analyzing workforces to understand which employees average at least 30 hours per week
Deciding whether to adopt a set hours requirement for certain job positions and whether job descriptions need to be created or modified
Identifying unique employment situations with respect to which determining employees' hours is not straightforward, such as adjunct faculty, airline pilots, commissioned salespeople and other groups who are not paid on a traditional hourly or salaried basis and determining how to credit hours for these groups
Establishing appropriate measurement periods to measure employees' working hours
Determining open enrollment and administrative periods during which eligible employees will be offered coverage for 2015
Evaluating plan document amendments that will be needed to implement eligibility changes, which may affect more than the health plan if eligibility changes are made with respect to benefit packages as a whole
Understanding the financial effects of shared responsibility assessments if the employer does not provide affordable coverage that provides minimum value for some or all of its employees
Evaluating responsibilities for providing coverage to "temporary" workers provided through staffing agencies, as well as seasonal, part-time, and contract workers
Monitoring new guidance that will be forthcoming about complying with the employer shared responsibility and reporting requirements
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.