PPACA’s Employer Reporting Requirements & Penalties Delayed

Posted in: Employee Benefits

In Notice 2013-45, the IRS formally announced transition relief for 2014 that effectively delays the employer mandate under PPACA until 2015.

Notice 2013-45

The Notice delays:

  • information reporting required by Section 6055 of the Internal Revenue Code;
  • information reporting under Section 6056 of the Code; and
  • employer shared responsibility provisions under Section 4980H of the Code.

Section 6055 requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs or other entity that provides minimum essential coverage to file an annual return reporting information on each individual for whom minimum essential coverage is provided. It also requires the entity to furnish a written statement to each individual listed on the return.

Section 6056 requires every large employer that must meet the shared employer responsibility requirements of section 4980H during a calendar year to file an annual return that reports the terms and conditions of the halth care coverage provided to the employer’s full-time employees for the year. The return must also include information on the employer’s full-time employees, including those who received the coverage and when they received it.

Section 4980H requires applicable large employers to make an offer of coverage to full-time employees or pay an annual penalty of $2,000 per full-time employee (less 30) if one employee obtains a federal subsidy. In addition, an employer could be subject to an annual penalty of $3,000 for each employee that declines coverage and obtains a subsidy if the coverage is not affordable or does not provide minimum value.

The IRS stated that the purpose of the transition relief is to allow additional time to simplify the Sections 6055 and 6056 reporting requirements and to provide employers, insurers and other providers of minimum essential coverage with sufficient time to adapt their reporting systems to comply with the requirements. This required reporting is integral to administration of the employer mandate and related penalties; therefore, the IRS has indicated that it is impracticable to determine which employers will owe penalty payments in 2014. As a result, no penalties will be assessed for 2014 even if an employer does not offer coverage to all full-time employees or if the coverage does not meet the affordability and/or minimum value requirements.

The IRS is encouraging insurers and employers to voluntarily comply for 2014 with the reporting requirements (once the information reporting rules have been issued) in preparation for 2015.

PPACA Provisions Not Delayed

This transition relief is specific to the information reporting and employer penalty requirements. It has no effect on the effective dates or application of other PPACA provisions, including:

  • the individual mandate;
  • establishment of Exchanges/Marketplaces;
  • availability of subsidies/credits;
  • insurance market reforms;
  • group health plan requirements (including elimination of all pre-existing condition exclusions, maximum 90 day waiting period, elimination of annual dollar maximums, and out-of-pocket limits);
  • new wellness plan requirements;
  • fees/taxes (including PCORI & reinsurance fees);
  • exchange notice requirement; and
  • expansion of Medicaid.

Unanswered Questions

Notice 2013-45 did not address several issues of concern to group health plan sponsors, including:

  • whether all plans will be required to comply as of January 1, 2015 (or if the relief granted for 2014 non-calendar year plans will apply in 2015);
  • how the individual mandate will be enforced without the related reporting;
  • how eligibility for federal subsidies will be determined (in 2014, subsidies may be given even if employees are offered employer-sponsored coverage that is affordable and provides minimum value);
  • whether employers will still be asked to verify employee information (including full-time status and eligibility for employer-sponsored health coverage); and
  • whether this delay is an indication of further delays to come.