Proposed regs. issued on large employer health coverage shared responsibility provisions

BY ALISTAIR M. NEVIUS, J.D.

The IRS has issued proposed regulations providing guidance on the large employer “shared responsibility” provisions in Sec. 4980H (REG-138006-12). Taxpayers can rely on the proposed regulations until the IRS issues final regulations or other applicable guidance. The IRS also posted FAQs on its website, explaining how the shared responsibility provisions work and who is subject to them.

The 144-page proposed regulations follow up on four notices the IRS issued in 2011 and 2012, which outlined possible approaches and asked for public comments (Notices 2011-36, 2011-73, 2012-17, and 2012-58). The proposed regulations generally incorporate the provisions of Notice 2012-58, as well as many of the provisions of Notices 2011-36, 2011-73, and 2012-17, with some changes in response to comments received.

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. An employer is an “applicable large employer” for a calendar year if, during the preceding calendar year, it employed on average at least 50 full-time employees. An employee is a full-time employee for any month if he or she was employed, on average, at least 30 hours per week.

The proposed regulations contain various definitions (Prop. Regs. Sec. 54.4980H-1) and rules for determining:

  • Status as an applicable large employer and applicable large employer member (Prop. Regs. Sec. 54.4980H-2);
  • Full-time employees (Prop. Regs. Sec. 54.4980H-3);
  • Assessable payments under Sec. 4980H(a) (Prop. Regs. Sec. 54.4980H-4); and
  • Whether an employer is subject to assessable payments under Sec. 4980H(b) (Prop. Regs. Sec. 54.4980H-5).


They also provide rules relating to the administration and assessment of assessable payments under Sec. 4980H (Prop. Regs. Sec. 54.4980H-6).

The proposed regulations adopt the position outlined in Notice 2011-36, which determines who is an employee and an employer under the common law standard. The IRS declined to adopt the definition of employer used in the Fair Labor Standards Act.

For purposes of determining who is a full-time employee, the proposed regulations adopt a commentator’s suggestion that the regulations use the term “hours of service” rather than “hours worked” (which had been used in Notice 2012-58).

Employers can rely on the proposed regulations pending the issuance of final regulations or other guidance; Sec. 4980H is effective for months after Dec. 31, 2013.

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

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