With the Patient Protection and Affordable Care Act on the horizon, employers are focused on the costs associated with benefits plans and medical coverage. In this regard, the proposed regulations providing guidance under section 4980H of the Internal Revenue Code (Code) with respect to the shared responsibility for employers regarding employee health coverage issued by the Internal Revenue Service highlight the role of new taxes in the healthcare reform law.
Many employers are wary of these new “shared responsibility” excise taxes that were issued by the IRS and the U.S. Treasury Department. However, the rules proposed by the two government agencies regarding the newly issued tax will take effect in 2014, giving employers around the country time to make the needed adjustments.
The proposed rules expand upon earlier IRS safe harbor guidance for determining whether an employee is full-time and for determining whether coverage is affordable. Employers will be allowed to look back up to 12 months to determine if variable hour employees meet the 30 hours per week average that is the definition of “full-time employee” under the regulations. The rules also serve to clarify that an employer will not be subject to tax for failure to offer coverage to spouses.
The Obama Administration is hoping that the IRS proposed rules will drive home the point that employers will be hit with penalties if they avoid the mandates outlined in the landmark healthcare legislation.
While some have applauded the proposal, as it offers some guidance to employers as to what will be taxed, others have noted that the rules don’t take into account special relationships between employers and workers. Part-time and contract employees have their own rules regarding the new law, but the wording of the IRS proposal prompted many business groups to ask for a more clearly defined framework.
As of the date of this entry, the IRS is still accepting public comments on the proposed regulations.
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