On Tuesday, July 2, the Treasury Department announced that the Obama Administration will provide an additional year before the mandatory employer and insurer reporting requirements under the Affordable Care Act (PPACA) commence. (This is known as the employer mandate.) This delay is intended to allow the Administration to look into ways to simplify the new reporting requirements and to provide time for employers to adapt health coverage and reporting systems while moving towards making health coverage affordable and accessible for their employees. The delay comes in response to complaints from businesses and lobbyists about reporting requirements for employers with 50 or more full time workers.
The original employer mandate stated that large employers with 50 or more full-time or full-time equivalent employees must offer full-time employees and their dependents (i.e., children up to age 26) coverage that is affordable and provides minimum level of coverage or pay a penalty tax if a full-time employee receives a premium tax credit or cost-sharing reduction for purchasing coverage on an Exchange. These requirements were originally to become effective on January 1, 2014.
Under the provisions of the delay, employers will not be required to provide health insurance to their workers until 2015. Employers will have another year to adjust their plans to avoid excise taxes related to employer-provided health care. Prior to the postponement, companies would have had to pay the Internal Revenue Service $2,000 for each full-time employee who did not get health coverage, beginning January 1, when the Patient Protection and Affordable Care Act was scheduled to come into full effect.
The Administration has promised formal guidance on this transition in the very near future. We also expect proposed rules this summer implementing information reporting. Once those rules are published, the Administration will encourage employers, insurers and other reporting entities to voluntarily implement this information reporting in 2014. Since this transition relief will make it difficult to determine which employers owe employer penalties, the Administration is extending this transition relief to the employer penalties – the penalties will not apply until 2015. The transition relief does not affect the opening of the Exchange, scheduled for October 1, nor the individual mandate. The Tax Professionals at Marcum LLP will continue to keep you apprised of any new developments.
As a reminder, what’s not changing as a result of these delays:
- The Exchanges/Marketplaces
- The individual mandate
- Individuals’ access to premium tax credits
- Any other PPACA provision
The bottom line is that there will be no penalties in 2014 on businesses that don’t meet the requirements of the “employer mandate.”