On July 9th, the IRS issued Notice 2013-45 announcing that certain reporting requirements under the Patient Protection and Affordable Care Act (“PPACA”) would be delayed for one year.  Specifically, Notice 2013-45 states that certain tax Code reporting requirements will not apply for 2014 and, instead, are delayed for one year (presumably meaning that the first reports required to be filed will have to be submitted in January 2016).  In addition, because the information otherwise required to be reported is vital to the IRS’s ability to assess and collect the employer “play or pay” penalties under PPACA, imposition of the penalties are likewise delayed and will not apply until 2015.  Finally, Notice 2013-45 clarifies that additional guidance will be issued later this summer regarding these employer reporting requirements under PPACA.

Specifically there are two reporting requirements that are delayed for one year: (1) Code section 6055 reporting, which requires insurers and self-funded employer plan sponsors to report to the IRS and plan participants whether plan coverage offers minimum essential health coverage in compliance with the employer mandate; and (2) Code section 6056, which requires applicable large employers of 50 or more employees to report to the IRS and plan participants specific information regarding its employer-provided coverage and the employees covered thereunder. 

It should be stressed that the IRS transition relief is limited to a delay in the effective date of the Code section 6055 and 6056 employer reporting obligations and delayed imposition of the penalties under the employer mandate.  The Notice specifically states that this delay has no effect on other PPACA requirements.  Absent guidance to the contrary, therefore, the various coverage mandates under PPACA continue to apply or will otherwise become effective in 2014.  For example, the 90-day waiting period rule is still scheduled to become effective in 2014.  Under that rule, a plan cannot enforce a waiting period beyond 90 days of the date an employee otherwise meets the plan eligibility provisions.  Likewise, the requirement that an employer must notify its employees of the existence of the public health insurance exchanges (a/k/a “marketplaces”) prior to October 1, 2103 remains effective.

What the Delay Means for Employer and Plan Sponsors

Notice 2013-45 is welcome news to many employers who have been struggling with implementing measures aimed at meeting PPACA’s employer mandate in an environment where guidance is noticeably lacking.  The one-year extension provides employers and plan sponsors a better opportunity to develop the information and administrative systems necessary to comply with the reporting requirements that are being delayed.  Significantly, the delay will also give the IRS additional time to develop the guidance that is needed to develop those systems.  This one-year delay means that employers should consider the following issues as they consider their compliance strategies:

  • Employers will now have time to determine which of its workers will or will not be treated as an employee for purposes of complying with the play or pay mandate in 2015.  This is significant, because employers have been struggling to identify and understand how various worker classifications fit within the PPACA standard for being “common law” employees.  Many companies retain the services of individuals who are not considered “W-2 employees,” but who might be considered “employees” under the common law standard of the proposed pay-or-play regulations.  This is a time-consuming and technical analysis and requires a review of various employment agreements and arrangements.  The challenges posed by having to potentially re-classify workers due to PPACA requirements has been the topic of many comments filed with the regulatory agencies and is expected to be addressed in final regulations anticipated later this year. 
  • Employers will not have to go through the exercise of identifying full-time “equivalent” employees nor will they have to deal with the complex rules for determining whether to treat variable hour employees as part-time or full-time for 2014.  The pay-or-play proposed regulations include a number of very complicated rules that address the manner with which hours must be counted and the length of coverage that must be offered to individuals who are determined to be “full-time employees.”  Numerous comment letters were filed with the IRS explaining various issues that need further clarification under the proposed rules and it is anticipated that the final regulations will provide additional guidance. 
  • Due to the delay, an employer will not need to determine whether its health coverage is affordable or meets minimum value in 2014 for purposes of determining whether the employer is subject to penalty.  Nevertheless, an employer may still wish to have that information available to answer questions from employees seeking information to assist them in making coverage decisions (i.e., whether to elect the employer-provided coverage or coverage through an exchange).  As stated in the Notice, an employee who meets certain income requirements will still be eligible for a federal premium subsidy to assist the employee in purchasing coverage through a public exchange, but only if the employer either does not offer coverage or only offers coverage that does not meet the affordability and/or minimum value standards under PPACA.  Although it is not clear that an employer is required to provide this information, employers may nonetheless wish to determine whether their health plans are affordable and meet minimum value.
  • Many employers who are contributing to multiemployer plans were in the process of contacting those plans to obtain information regarding affordability, minimum value and dependent coverage in order to ensure that under the special 2014 transition rule no penalty would apply with respect to union employees on whose behalf contributions were made to the multiemployer plans.  As a result of the delay, there is significantly less urgency associated with those inquiries unless the employer wishes to have such information to answer employee questions regarding whether the coverage offered under the multiemployer plan is affordable and meets minimum value.  As the transition rule governing multiemployer plans only applies to 2014, it remains to be seen how the employer mandate will apply to employers contributing to these plans once the employer mandate does take effect in 2015.

A Final Word on the Matter

Employers and plan sponsors now have an opportunity to take their time as they work through the guidance and develop their compliance strategies.  At the same time, the PPACA mandate has now attracted a high degree of Congressional scrutiny.  There are Congressional hearings on the reasons for the delay and there are also various legislative initiatives working their way through Congress.  For example, legislation was introduced in the U.S. Senate that would modify the definition of a “full-time employee” from a 30 hour per week standard to a 40 hour per week standard.  If that legislation is ultimately passed and signed into law, employers would have another form of relief from the pay-or-plan mandate. 

This is just another way to say that things are changing and developing on nearly a daily basis.  Employers and plan sponsors should use the remainder of 2013 and a good part of 2014 to evaluate the new regulatory and any legislative developments and then renew their intense efforts to fully implementing their compliance strategies as we move toward 2015.