Finding Liberation in the Big Picture of the Employer Shared Responsibility Tax

Introduction -

So much energy has been spent on what the final regulations on the employer shared responsibility tax and the related final reporting regulations (the ‘‘ESRR’’) say, that some of the most significant considerations and planning opportunities have been missed because people have focused on the complex details (the trees), did not focus on the bigger picture (the forest), where the forest ends and what the ESRR does not say or does not require. Many have considered these rules as defining eligibility when all they really define is when an employer shared responsibility tax will or will not be assessable on an employer and on which employees of an employer. While the ESRR can be used as eligibility rules, nothing requires that the ESRR define eligibility.

There are ways to utilize the ESRR to minimize an employer’s potential exposure to liability for the employer shared responsibility tax. To be able to minimize an employer’s shared responsibility tax exposure, the employer must know its workforce, their positions, the business needs and any seasonal fluctuations, turnover, the premiums charged to workers or different groups of workers, the restrictions, if any, on an employer’s flexibility to charge different premiums to different work groups and the income levels of the different workers; know when the employer shared responsibility tax can be assessed; and know what the ESRR require and what they do not require. Sometimes what is not said is as important as or more important than what is said. This article is intended to dispel some myths circulating and encourage everyone to take a step back and remember to look at the forest as well as the trees to see the big picture of the employer shared responsibility tax and related reporting rules.

Originally published in Bloomberg BNA's Tax Management Memorandum, Vol. 56, No. 3 p. 43, on February 9, 2015.