IRS issues formal notice delaying employer mandate and coverage reporting until 2015
July 26, 2013
On July 9, 2013, the IRS issued guidance that formally delays until 2015 the following Affordable Care Act provisions:
- The employer mandate tax penalties
- The coverage information reporting requirements for providers of minimum essential coverage
- The coverage information reporting requirements for applicable large employers
While tax penalties will not be assessed in calendar year 2014, the IRS is encouraging voluntary compliance. The notice indicates that the employer mandate tax penalties, and tax penalties for failure to comply with the coverage information reporting requirements, will take effect with respect to calendar year 2015.
Tax penalties for an applicable large employer that either (1) does not offer coverage to full-time employees, or (2) offers coverage to full-time employees that does not meet affordability or minimum value standards, and has at least one full-time employee who receives an ACA premium tax credit, will not be assessed in 2014.
The notice also reiterated the general process for assessing tax penalties on applicable large employers. According to the notice, this process will take effect beginning with respect to any potential employer mandate penalties assessed for coverage months in 2015. Tax penalties would not be paid by the employer until 2016.
- After receiving information returns from applicable large employers (the coverage reporting referenced above, which is delayed until 2015) and information about employees claiming premium tax credits (primarily, via individual tax returns), the IRS will determine whether an employer mandate payment may be due.
- The IRS will then contact the employer. The employer will have an opportunity to dispute before payment is assessed.
The employer mandate penalty is expected to be remitted via a special assessment. After the process described above, if the IRS contacts an employer with a demand for payment it will instruct the employer on how to make payment.
The notice indicated that proposed rules on the delayed coverage reporting requirements are expected to be published in summer 2013. The proposed rule will include the transition relief (delayed effective date) described in the notice. The IRS intends to use the transition relief to discuss with stakeholders methods for simplifying the reporting requirements.
Effect on other provisions
The IRS Notice does not impact the effective date or applicability of any other provisions of the Affordable Care Act. If employers offer coverage, they still have to comply with all ACA mandates related to that offer of coverage, and any other applicable ACA provisions. The notice does not impact the individual mandate’s effective date, premium tax credit eligibility, or any other provision of the ACA outside of the delay in assessment of non-compliance penalties associated with Sections 4980H, 6055 and 6056 of the tax code (employer mandate, minimum essential coverage reporting and applicable large employer reporting requirements, respectively).
Where can I find more information?
More information can be found in Notice 2013-45.
The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.