IRS gives limited transition relief for employer payment plans and 2% S corporation shareholder arrangements.
In Notice 2015-17, the IRS announced transition relief from the application of the Sec. 4980D excise tax, which applies to health plans that do not meet the market reform requirements of the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148.
The Sec. 4980D excise tax of $100 per day per affected participant applies to health insurance employer payment plans that do not comply with the market reforms imposed on group health plans by PPACA.
The AICPA had been pressing the government for months to provide answers on this issue and transition relief. Earlier IRS guidance (Notice 2013-54) caused great confusion among practitioners about how to treat reimbursements of medical insurance premiums through employer payment plans and S corporation health care arrangements for 2% S corporation shareholder-employees. The latest notice provides some clarification. It also announced that employers with employer payment plans as described in Notice 2013-54 that are not applicable large employers are eligible for temporary relief from assessment of the Sec. 4980D excise tax. An employer is not an applicable large employer (and therefore is not liable for the Sec. 4980H shared-responsibility payment) if it employs fewer than 50 full-time employees on business days during the preceding calendar year. This relief applied through 2014 and, for employers that are not applicable large employers in 2015, through June 30, 2015. This is intended to give small employers additional time to find health insurance coverage that complies with the law. Eligible employers are also excused from filing Form 8928, Return of Certain Excise Taxes Under Chapter 43 of the Internal Revenue Code.
In the notice, the IRS also addresses the treatment of a 2% S corporation shareholder. In a 2% shareholder-employee health care arrangement, the corporation typically purchases insurance for the shareholder, the premiums are included in the shareholder’s income, and he or she takes a deduction for them. Until further notice and at least until the end of 2015, these 2% shareholder plans will not be required to meet the market reform requirements. S corporations with these arrangements also will not be required to file Form 8928.
The notice also discusses the integration of a Medicare premium reimbursement arrangement and a TRICARE-related health reimbursement arrangement (HRA) with a group health plan and whether those plans qualify as group health plans that satisfy the market reform rules.
In addition, the notice discusses whether certain employer payments to employees for health insurance coverage satisfy the requirements of the health care reform law.
- Notice 2015-17
By Sally P. Schreiber , J.D., a JofA senior editor.