Beginning in 2014, large employers will be subject to a potential tax penalty under the “shared responsibility” provisions of the Affordable Care Act’ (“ACA” or “Obamacare”). This is commonly known as the “play or pay” penalty, because applicable large employers may be subject to the penalty if they fail to offer their full-time employees (and their dependents) minimum essential health coverage, or if the coverage they offer is either unaffordable to the employee or does not provide minimum value.
The IRS recently proposed regulations to implement the ACA’s employer mandate, and final regulations are expected later this year. This was the last large piece of the regulatory puzzle to fall into place before play or pay begins next year. Notably, the IRS made clear that it would seek to crack down on an employer’s manipulation of the workforce to avoid penalties, for instance, through the use of temporary staffing agencies that might be employers in name only.
Although potential penalties will not accrue until 2014, employers should plan now for Obamacare. Many employers will need to look at both the structure of their workforce and the structure of their business entities in 2013 in order to assess the potential tax penalties and compliance issues when play or pay comes into force. This article discusses a couple key reasons why it is important for employers to begin planning and assessing their options as soon as possible.
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