IRS Guidance On Delay in Implementing Pay-or-Play Penalties of ACA Health Care Reform Law


The IRS issued Notice 2013-45 recently, the official guidance document explaining the one-year delay in the implementation of the employer pay-or-play penalties under the Patient Protection and Affordable Care Act ("PPACA") health care reform.

As announced in a Treasury blog, the IRS has delayed for one year the information reporting requirements (found in sections 6055 and 6056 of the Internal Revenue Code) that apply to insurers, self-funded plans, government agencies and large employers regarding health plan coverage.  This purpose of this delay is to allow the IRS addition time “for dialogue with stakeholders in an effort to simplify the reporting requirements”  and for employers and other reporting entities to “develop their systems for assembling and reporting the needed data.”  Since the collection of this information crucial for the IRS’ determination of an employer’s liability for pay-or-play penalties will not occur in 2014, the IRS has announced that it will not impose pay-or-play penalties for 2014.  In the Notice, the IRS states that it expects that proposed regulations on the information reporting requirements will be issued later this summer.

The Notice reiterates that this delay will have no effect on any other parts of PPACA, including the premium tax credit or the individual mandate.    

Based on this delay, employers may wish to consider delaying for a year the implementation of certain changes planned for group health plans for 2014 in order to avoid the pay-or-play penalties.  These changes include, for example, (1) expansions of eligibility for health benefits to all employees who work 30 or more hours a week; (2) changes to make health plan coverage “affordable” or to assure that it provides “minimum value”; and (3) the implementation of measurement and stability periods for seasonal and variable hour workers.  Of course, any such decision to delay may have an impact on employees, since they will be required to purchase insurance next year or pay a tax penalty if they do not have coverage through their employers or from another acceptable source, such as Medicaid or Medicare.  Employers will also want to consider the impact of their coverage decisions for 2014 on the availability of the premium tax credit:  employees who are not enrolled in employer-sponsored health plans and who are not offered affordable, minimum value coverage by their employers may qualify for premium tax credits when they purchase insurance through the exchanges.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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