Late yesterday afternoon, Mark J. Mazur, Assistant Secretary for Tax Policy at the U.S. Department of the Treasury, informally announced on the Treasury Department’s "Treasury Notes" blog that the administration is delaying by one year the Patient Protection and Affordable Care Act (PPACA) Employer Pay or Play penalties under Section 4980H of the Internal Revenue Code (Code) and the mandatory reporting requirements under PPACA. Within the next week, the administration expects to publish formal guidance describing the transition.
This informal announcement does not impact any provisions of PPACA that are already effective, nor does it impact other provisions of PPACA scheduled to become effective in 2014, such as the elimination of pre-existing condition exclusions for adults. It remains unclear what impact the transition will have on other requirements of PPACA, for example, whether the employer notice of exchanges will need to be revised to reflect the delay.
Pay or Play Mandate and Related Reporting Requirements
All applicable large employers (generally those with 50 or more full-time equivalent employees) must offer substantially all full-time employees and their children group health plan coverage or risk being subject to a penalty for failure to offer coverage.
If an applicable large employer offers no group health plan coverage and any of its full-time employees purchase insurance through a state exchange and receive a premium tax credit or cost-sharing subsidy, the employer is liable for a penalty in an amount equal to $2,000 times the employer’s number of full-time employees, less 30.
If an employer to which the requirements apply offers group health plan coverage that is either unaffordable or fails to offer minimum value and any of its full-time employees purchase insurance through a state exchange and receive a premium tax credit or cost-sharing subsidy, the employer is liable for a penalty in an amount equal to $3,000 times the number of full-time employees who purchase coverage through a state exchange and receive a premium tax credit or cost-sharing subsidy.
Insurers, self-insuring employers and other parties that provide health coverage are required to file annual returns reporting information for each individual for whom minimum essential coverage is provided. Employers subject to the Pay or Play Mandate during a calendar year are required to file a return with the IRS that reports the terms and conditions of the health care coverage provided to the employer’s full-time employees for the year and information on the employer’s full-time employees, including those who received the coverage and when they received it.
The administration expects to publish proposed rules implementing these provisions this summer after a dialogue with stakeholders on how to minimize and streamline the reporting requirements of PPACA.
The anticipated guidance will presumably contain additional details regarding the impact of the delay. Thompson Hine’s employee benefits lawyers will continue to monitor future guidance impacting employers’ obligations under PPACA.
In the meantime, employers should continue to comply with those requirements already in effect and prepare to comply with other health care reform-related requirements that are set to take effect in 2014 and future years. Employers also should consider how the delay impacts any planned communications to employees about health care reform generally. Furthermore, while a one-year delay is welcome news to most employers, it does not necessarily mean they should cease efforts to prepare for the Pay or Play Mandate – they just have a little more time over which to prepare.