Tax Provisions of the Affordable Care Act Effective 2015

Employer Shared Responsibility - The "Pay or Play" Rules

The Employer Shared Responsibility rules under section 4980H require employers with more than 50 full-time employees (a full-time employee for purposes of these rules is an employee working at least 30 hours per week), including full-time equivalents (FTEs), to offer health care coverage to their 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. 

In February 2014, the IRS issued final regulations which include transition relief for 2014 providing employers an additional year to comply with the rules and avoid penalties.  Thus, the rules take effect on January 1, 2015.  The IRS also posted an FAQ on their website to help employers deal with the nuances of the rules.

If an employer does not comply with the mandate by not offering minimum essential insurance coverage to their employees, they will be subject to the Employer Shared Responsibility payment (also referred to as a penalty) 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.

In March 2013 the AICPA submitted comments on the proposed regulations to request clarification of various elements of the regulations.

Previously Issued Guidance:

  • Notice 2013-54 states that beginning January 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 in July 2013 pushing the date back for the employer shared responsibility rules 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] in December 2012. 
  • 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, according to the individual shared responsibility rules, individuals have to maintain minimum essential health coverage or pay a penalty in the form of a tax on their Federal income tax return.  If an individual purchases insurance through the Marketplace, they may be eligible for a premium tax credit to help defray the cost of the insurance.

These information reporting rules, enacted so the IRS could track an individual's compliance with the individual mandate as well as their eligibility for the premium tax credit, mandate that beginning in 2015, insurers (including employers who self-insure) who provide minimum essential coverage to any individual during a calendar year must report certain health insurance coverage information to both the covered individual and to the IRS.  Final regulations on these rules were issued by the IRS and Treasury in March 2014.   

The reporting will be done on the following forms which were released in draft format on July 24, 2014:
    * Form 1094-B - Transmittal of Health Coverage Information Returns
    * Form 1095-B - Health Coverage

Previously Issued Guidance:

  • Proposed regulations were issued in September 2013. 
  • Notice 2013-45 provided 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

These reporting requirements apply to applicable large employers (ALEs) which are subject to the shared responsibility provisions under section 4980H, or the "Pay or Play" rules.  These rules require that ALEs have to file, on an annual basis, an information form to report certain information on the health insurance that they offer (or do not offer) to their full-time employees.  The forms must be filed with respect to each full-time employee.  The employer must provide each full-time employee with a statement by January 31 of the year following the calendar year for which the returns are filed.

Reporting is mandatory beginning in 2016 and voluntary in 2015.

The reporting will be done on the following forms which were released in draft format on July 24, 2014: 
    * Form 1094-C - Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns

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

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