The IRS announced that annual reporting requirements for employers subject to the "pay or play" provisions of the Affordable Care Act ("ACA") will be delayed with no penalties assessed on employers for 2014. In 2015, penalties will start. Starting in 2014, however, individuals remain subject to the requirement to have health coverage or pay a penalty, despite legislative efforts to delay this portion of ACA.
Under ACA, employers must report to the IRS at the end of each year with respect to the health coverage provided to full-time employees. Guidance on these reporting requirements has not yet been issued. The reported data would be matched by the IRS with information on individuals and their coverage to determine if the employer would be assessed ACA penalties. The IRS recognized that there is not enough time in 2013 for employers to understand guidance and adapt payroll and other systems to be able to produce the data needed for reporting. With a delay in guidance and reporting, penalties could not be accurately assessed and so they were suspended for a year.
The IRS notice pointed out that the other provisions of ACA, included the individual mandate and premium tax credit, are not being delayed.
The IRS intends to "simplify the reporting requirements consistent with effective implementation of the law." Whether this signals relaxation of the complex rules for determining full-time employees, including the lookback, stability and administrative periods, remains to be seen.
Should you do nothing in 2014? No. Employers should use the added time to determine how the employee determination rules will identify full-time employees, to document the methods adopted by the employer and to test the outcome without penalty. 2014 will also be a good time for employers to consider how to respond to IRS assessments and notices from the insurance exchanges when an employee qualifies for a tax credit so the employer does not pay unnecessary penalties. Finally, 2014 is an opportunity to educate employees about ACA and its consequences and to confirm policies, practices and systems to record working time.
There are many unanswered questions at this point. Additional guidance is planned but its scope is uncertain. Stay tuned……