Employer mandate delay – What you need to know

IRS provides transition relief for one-year delay in enforcing the employer health insurance mandate

On July 9, 2013, the Internal Revenue Service (IRS) issued official guidance on a one-year delay in enforcement of the section 4980H employer health insurance mandate and related information reporting provisions, stating that the guidance had no effect on the application of other healthcare reform provisions, including the individual mandate.

Notice 2013-45 states that given the lack of information reporting, which was also delayed one year, the IRS would be unable to determine which employers owe the penalty under section 4980H starting in 2014. It also says that proposed rules for the information and reporting provisions, expected to be published later this summer, will reflect the fact that transition relief will be provided for 2014. Since the transition relief is expected to make it "impractical" to determine which employers owe shared responsibility payments for 2014, no such payments will be assessed for that year. Regardless of the delay, the IRS encourages employers, insurers, and other reporting entities to voluntarily comply with the information reporting during 2014, once these proposed rules have been issued.

The Notice stipulates that this transition relief does not affect employees’ access to the premium tax credit for 2014, and therefore, qualified individuals will continue to be eligible for the credit by enrolling in a qualified health plan through Affordable Insurance Exchanges. Also, the IRS emphasized that the transition relief through 2014 for the employer mandate and its information reporting will have no bearing on the effective date or application of other Affordable Care Act (ACA) provisions, such as the individual mandate and the reporting and payment of the Patient-Centered Outcomes Research Institute (PCORI) fee due July 31, 2013.

The administration’s delay has prompted discussions on Capitol Hill as to postponing other elements of the ACA as well as possible challenges to the constitutionality of the delay. In addition, the employers’ ability to delay implementation could potentially lead to set-up delays with insurance exchanges or marketplaces, and since the employer mandate was a primary funding mechanism of the law, further questions exist as to the viability of the exchanges. Consequently, where individuals will be able to purchase coverage is uncertain.

The deferment gives employers the opportunity to make a thorough analysis of their employee numbers and how the ACA impacts their business. We recommend employers use this delay to give careful analysis to the implementation process rather than as an opportunity to postpone addressing the issue.

Please contact your Baker Tilly tax advisor to discuss how this transition relief impacts you and your business.