In a blog entry posted July 2, 2013, to the U.S. Department of Treasury website, President Obama’s administration announced that employers who fail to satisfy the requirements of the Employer Shared Responsibility Mandate (“mandate”), a provision of the Patient Protection and Affordable Care Act (“PPACA”), will not be subject to excise taxes under Internal Revenue Code (“Code”) Section 4980H in 2014. The administration’s announcement means that enforcement of the mandate will be delayed until January 1, 2015.
Overview of Mandate and Reporting Requirements
Code Section 4980H imposes excises taxes on certain large employers (defined as employers with 50 or more full-time or full-time equivalent employees) that (i) fail to offer minimum essential health care coverage to their full-time employees (defined as 30 or more hours per week or 130 or more hours per month), or (ii) offer minimum essential coverage but fail to make that coverage affordable to their employees or fail to ensure the coverage provides minimum value. (Additional information on the mandate is available here.) The mandate was to have been effective on January 1, 2014
. Code Section 6055 imposes information reporting requirements on health insurers, sponsors of selfinsured health plans, and others. Code Section 6056 requires employers subject to the mandate to file reports on health care coverage provided to employees. These reports are to be used, at least in part, by the Internal Revenue Service to enforce the requirements of the mandate and assess excise taxes. The first reports were to have pertained to the 2014 coverage period (coverage provided at any time during the 2014 calendar year) and were required to be filed in 2015.
Delay in Reporting Requirements Creates Non-Enforcement Period for Excise Tax Assessment
In its blog post, the Department of Treasury (“Department”) announced that the effective dates for the Code Section 6055 and 6056 reporting requirements would be delayed one year, so that reports would not be required with respect to the 2014 coverage period. The reasons for granting this transition relief, explained the Department, were to allow reporting requirements to be streamlined and also to give reporters additional time to get proper reporting systems in place. The Department disclosed that proposed regulations on the reporting requirements are expected to be published this summer.
Because the transition relief with respect to reporting requirements renders the task of determining which employers owe excise taxes due to noncompliance with the mandate impractical, the Department reported that excise taxes under Code Section 4980H would not apply in 2014. Such taxes will apply in 2015.
Formal Transition Relief Guidance Forthcoming
The Department announced that formal guidance regarding the transition relief will be published within the next week. It is not clear whether such guidance will provide information only on the relief from reporting requirements or also with respect to the relief from excise taxes. Additionally, it is not clear whether an employer will be required to take certain steps toward implementation in 2013 or 2014 in order to be exempt from the reporting requirements or excise taxes in 2014. There was no indication of such a requirement in the Department blog entry.
Other PPACA Provisions Unaffected
The Department noted that all other provisions of PPACA remain unchanged by this announcement. This includes the individual coverage mandate as well as the provisions relating to the terms of an individual’s eligibility for a premium tax credit or cost-sharing reduction when purchasing health insurance coverage on a government exchange. It also includes the so-called Public Health Service Act mandates applicable to employer-sponsored group health plans.