IRS announces additional one-year delay in health coverage penalty for midsize employers

BY ALISTAIR M. NEVIUS, J.D.

The IRS announced on Monday that it is delaying the so-called shared-responsibility requirement under Sec. 4980H for employers who have 50 to 99 full-time equivalent employees in 2014 (T.D. 9655). These employers will now have until 2016 to offer health care coverage to their employees or be subject to the shared-responsibility payments. However, these employers will still be required to report on their workers and health care coverage in 2015.

Last July, in Notice 2013-45, the IRS postponed the Sec. 4980H shared-responsibility penalty to 2015 (its original effective date was 2014). The regulations announced Monday further delay the penalty for one year for mid-size employers.

The delay is part of new final regulations covering several aspects of the rules under Sec. 4980H. To be eligible for the delay, employers must not reduce their workforce or hours of service in order to qualify and they must maintain their previously offered health coverage.

For employers with 100 or more full-time equivalent employees, the new 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 full-time equivalent employees that do not meet these percentages will be required make an employer shared-responsibility payment for 2015.

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.

The final regulations also contain transition guidance for noncalendar-year plans.

The Treasury Department also announced in a press release that it intends to soon issue final regulations that will streamline the reporting requirements “for employers that offer highly affordable coverage to all or virtually all of their full-time employees.”

Alistair M. Nevius ( anevius@aicpa.org ) is the JofA’s editor-in-chief, tax.

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