The Employer Shared Responsibility Penalty under the ACA Will Not Be Assessed by IRS until 2015

The Treasury Department recently announced that the IRS will not enforce the employer shared responsibility penalty. Under the Affordable Care Act (ACA), an employer with more than 50 full-time equivalent employees could be assessed a penalty for either:
• not offering employees a health plan or
• not offering a plan that was affordable and meets the minimum value requirement

The announcement was made on the Treasury Department’s blog:

In a statement, the Treasury Department acknowledged that employers need more time to comply with the ACA.

“We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.”

In the same announcement, they also indicate further guidance on the reporting requirements under Section 6055 and 6056 of the ACA will be provided over the summer.

What Does this Mean for Employers?

While the IRS will not enforce the employer shared responsibility penalty, it is clear that they still intend for employers to try and meet the other requirements under the ACA.

Required Notifications:
Employers will still need to provide the required notices under the ACA including the Summary Benefits Coverage (SBC). The Health Insurance Marketplace (sometimes referred to as the State Exchange) notice must still be mailed to all employees no later than October 1, 2013.

Tracking Eligible Employees:
Employers should still keep track of employee eligibility for the group health plan. While there may not be a penalty in 2014, the Health Insurance Marketplaces may still require the employer to verify eligibility to determine if an employee and/or their family are eligible for a Premium Tax Credit.

Plan Modifications:
It appears that employers may have another year to try to modify existing plans or to purchase plans that meet the affordable and minimum value requirements. A plan that isn’t in compliance can avoid the $2,000 or $3,000 employer shared responsibility penalty for 2014. However, this year may be best used by employers to ‘test’ their plans without fear of a penalty.

By tracking what actually happens, an employer will get a better picture of how to avoid a penalty after the Health Insurance Marketplace is operational. For example, identifying those employees who actually go to the Marketplace to purchase insurance and trigger the $3,000 penalty in 2014 may allow an employer to adjust the ‘affordable’ part of their group health plan.

In short, employers may want to proceed as if they still have to meet the January 1, 2014 deadline now so that they can avoid possible costly penalties later.

Assistance with the ACA Administration:

BCL Systems, Inc. offers a full menu of options to not only assist in avoiding the employer shared responsibility penalty but also in keeping an employer up-to-date with the latest ACA regulations. Make sure to check out our HR News and then subscribe to receive future articles and notice of up-coming webinars.