Tax Provisions Affected by Health Care Reform 2015 


    Employer Shared Responsibility - The "Play or Pay" Rules

    On February 10, 2014, the IRS issued final regulations implementing the employer shared responsibility provisions.  The IRS also posted an FAQ on their website.

    The final regulations include transition relief for 2015 for all employers, providing them more time to comply with the provisions and avoid penalties.  Employers who employ on average at least 50 but fewer than 100 full-time employees (including full-time equivalent employees (FTEs)) who provide an appropriate certification will not be required to comply with the shared responsibility provisions until 2016.

    How it works:
    Employers with more than 50 full-time employees (full-time employee is defined as an employee working at least 30 hours per week), including full-time equivalent employees (FTEs), must offer health care coverage to employees that is affordable, and provides minimum value or pay a penalty if an employee purchases insurance in an exchange and receives a subsidy or tax credit.

    The penalties for not offering minimum essential insurance coverage are as follows:

    • $2,000 times the number of all FTEs less the first 80 employees for employers with 100+ FTEs in 2015 and less 30 employees in subsequent years.
    • $3,000 for each FTE who purchases insurance through an exchange that is subsidized and who is not offered minimum essential coverage that is affordable and provides minimum value.

    On March 14, 2013 the AICPA submitted comments on the proposed regulations in order to request clarification of various elements of the regulations.

    Previously Issued Guidance:

    • Notice 2013-54 states that beginning Jan. 1, 2014, employers cannot reimburse employees for individual health care coverage, as that coverage does not qualify as a group health plan.
    • Treasury posted a blog on July 2, 2013 stating that the date for the employer shared responsibility rules to take effect was moved from 2014 to 2015. 
    • Notice 2013-45 provides transition relief for the employer shared responsibility payment as well as the reporting rules under sections 6055 and 6056.
    • The IRS issued proposed regulations [REG-138006-12] on December 28, 2012 as well as a list of questions and answers related to section 4980 providing employers a roadmap to follow when implementing the new "play or pay" rules. They also provided various safe harbors and transition rules to help ease the administrative burden of implementing the rules in 2014.
    • Notice 2012-59 provides information on waiting periods which apply before coverage begins.
    • Notice 2012-58 discusses safe harbors that may be used to determine full-time employee status and to determine if coverage is affordable.

    Information Reporting of Minimum Essential Coverage Under Section 6055 for Insurers

    Beginning in 2014, individuals must maintain minimum essential health coverage or pay a penalty in the form of a tax on their Federal income tax return.  This is known as the individual shared responsibility payment. 

    If an individual purchases insurance through a state run exchange, they may be eligible for a premium tax credit to help defray the cost of the insurance.

    The information reporting of minimum essential coverage rules were enacted in order for the IRS to track an individual's compliance with the individual mandate and their eligibility for the premium tax credit.  According to the requirements, insurers (including employers who self-insure) who provide minimum coverage to any individual during a calendar year must report certain health insurance coverage information to both the covered individual and to the IRS.

    Proposed regulations were issued in September 2013. 
    Final regulations were issued by the IRS and Treasury in March 2014.
     
    The following draft reporting forms were released on July 24, 2014 - Instructions to follow:
    Form 1094-B - Transmittal of Health Coverage Information Returns
    Form 1095-B - Health Coverage

    Timing (to be updated for final regulations):
    The reporting requirements were originally slated to begin in 2014, however per a blog post by Treasury on July 2, 2013, the effective date has been moved to 2015.  Notice 2013-45 provides transition relief which is meant to provide time to simplify the reporting requirements before they take effect.


    Information Reporting Requirements for Large Employers Under Section 6056

    The reporting requirements mandate that applicable large employers must report annually, an information return relating to health insurance that they offer (or do not offer) to their full-time employees.  The returns must be filed with respect to each full-time employee.  The employer must also provide each full-time employee with a statement by January 31 of the year following the calendar year for which the returns are filed, providing certain information related to the health insurance offered to their employees.

    The following draft reporting forms were released on July 24, 2014 - Instructions to follow:
    Form 1094-C - Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns

    Form 1095-C Employer-Provided Health Insurance Offer and Coverage

    Guidance:
    Proposed regulations were released in September 2013.
    Final regulations were issued by the IRS and Treasury in March 2014.

    Timing:
    The final large employer shared responsibility regulations include transition relief for 2015 for all employers.  Also, employers who employ on average at least 50 but fewer than 100 full-time employees (including full-time equivalent employees (FTEs)) who provide an appropriate certification will not be required to comply with the shared responsibility provisions until 2016.  This is also when the information reporting rules take effect.



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