IRS delays health coverage mandate another year for midsize employers


The IRS in February delayed the so-called shared-responsibility requirement under Sec. 4980H for employers who have 50 to 99 full-time-equivalent employees (FTEs) in 2014. These employers will now have until 2016 to offer health care coverage to their employees or be subject to the shared-responsibility penalty. However, these employers will still be required to report on their workers and health care coverage in 2015, for which the IRS separately issued final regulations providing for simplified methods (see next item).

The delay was part of final regulations under Sec. 4980H that also provided other significant transition relief and revisions of proposed regulations. The final regulations also contain transition guidance for noncalendar-year plans.

Last July, in Notice 2013-45, the IRS postponed the Sec. 4980H shared-responsibility penalty to 2015. (Its original effective date was 2014.) The final regulations further delay the penalty for one year for midsize employers. To be eligible for the delay, employers must not reduce their workforce or hours of service to qualify and must maintain their previously offered health coverage.

For employers with 100 or more FTEs, the final regulations phase in the percentage of full-time workers to whom such employers need to offer minimum essential coverage. The percentage is 70% in 2015 and 95% in 2016 and beyond. Employers with 100 or more FTEs that do not meet these percentages will be required to make an employer shared-responsibility payment for those years.

Under Sec. 4980H, an applicable large employer is subject to a penalty if its employer-sponsored health coverage does not provide “minimum essential coverage” or is not affordable relative to the employee’s household income and at least one full-time employee has been certified as having enrolled in a qualified health plan with respect to which an applicable premium tax credit or cost-sharing reduction is allowed or paid with respect to the employee.

  T.D. 9655

By Alistair M. Nevius, J.D., the JofA’s editor-in-chief, tax.


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