In a surprise move, the Obama administration has announced that it is delaying the employer pay-or-play mandate and accompanying insurer reporting requirements by one year. According to the Treasury Department notice, this delay is intended to provide the agency with additional time to simplify the reporting requirements, and “provide time to adapt health coverage and reporting systems while employers are moving toward making health coverage affordable and accessible for their employees.” Formal guidance on this grace period is expected within the week.

Additional information on the announcement is as follows:

The ACA includes information reporting (under section 6055) by insurers, self-insuring employers, and other parties that provide health coverage. It also requires information reporting (under section 6056) by certain employers with respect to the health coverage offered to their full-time employees. We expect to publish proposed rules implementing these provisions this summer, after a dialogue with stakeholders - including those responsible employers that already provide their full-time work force with coverage far exceeding the minimum employer shared responsibility requirements - in an effort to minimize the reporting, consistent with effective implementation of the law.

Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.

We recognize that this transition relief will make it impractical to determine which employers owe shared responsibility payments (under section 4980H) for 2014. Accordingly, we are extending this transition relief to the employer shared responsibility payments. These payments will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.

The announcement comes as many employers have been scrambling to prepare for the 2014 requirement that those with 50 or more full-time employees and full-time equivalent employees either offer health coverage that meets certain standards to full-time employees or pay a penalty. The one-year reprieve will come as welcome news to employers as the 2014 deadline approached in the absence of clear guidance from the regulators about how both the employer mandate and reporting requirements would work.

According to the statement from Mark Mazur, Assistant Secretary for Tax Policy at the Treasury Department, “During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage." Mazur noted also that the transition relief will not impact any other provision of ACA, including access by employees to premium tax credits for use in the future health insurance exchanges.

The delay in implementation of these employer requirements, a key component of the healthcare reform law, calls into question whether or not other provisions of the law slated to begin in 2014, namely the new healthcare exchanges, will meet the deadline. While much about the implementation of the ACA remains uncertain, today’s announcement affords an opportunity to try to simplify the burdens created by the mandate.