Employer Play-or-Pay
Mandate Penalties and Certain Employer Reporting Requirements Delayed Until
2015
Posted: 11 Jul 2013 09:27 AM PDT
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Treasury Says No Impact on Any Other
Provisions of the PPACA in 2014
The Obama Administration
unexpectedly announced on July 2 that employers will be provided an additional
year, until 2015, before any penalties are assessed under the employer
play-or-pay mandate in the Patient Protection and Affordable Care Act (PPACA)
(i.e., both the $2,000- and $3,000-per-year employer penalties are delayed
until 2015).
In addition, the mandatory employer
and insurer reporting requirements (including identification of full-time
employees and their months of coverage) under Internal Revenue Code (IRC)
Sections 6055 and 6056 are also delayed for a year. Thus, employers will not
incur penalties for failing to provide affordable, minimum-value health
coverage to their full-time employees in 2014, nor will insurers or employers
be required to comply with the extensive information reporting requirements
under those code sections for the 2014 calendar year.
In an unusual fashion, the Obama
Administration announced the delay only via postings on the Treasury Department
and White House websites. Mark Mazur, assistant secretary for tax policy at the
Treasury wrote in a blog post, “We have heard concerns about the complexity of
the requirements and the need for more time to implement them effectively.”
Mazur went on to write that “our actions today do not affect employees’ access
to the premium tax credits available under the ACA (nor any other provision of
the ACA).”
The Administration stated that the
goals of the one-year delay are twofold. First, it will allow the government to
consider ways to simplify the new reporting requirements, and second, it will
provide time for employers to adapt health coverage and reporting systems. It
is important to note that the delay also takes a controversial piece of the law
off the table before the midterm congressional elections.
According to the Treasury, rules
regarding the delay will be proposed this summer. Employers will be encouraged
but not required to adopt and follow those reporting requirements in 2014. The
full text of the announcement by the Treasury can be found at treasury.gov.
What Does This Mean?
Aside from the delay in employer
reporting under IRC Sections 6055 and 6056, and the delay in the play-or-pay
penalties, the Treasury says the delays will not affect employees’ access to
the premium tax credits nor any other provision of the PPACA. Even if one
accepts that statement at face value, employers need to begin considering the
potential impact of the delay as we await details from the government that will
provide answers to the following questions:
§ What is the practical
impact of the delay in play-or-pay penalties on counting employee hours in 2014
(i.e., will employers be required to identify full-time employees in 2014 for
any other reasons,
aside from play-or-pay, such as inquiries from public health insurance
exchanges)?
§ Will employers still need
to distribute the mandatory notice to employees regarding public health
insurance exchanges by October 1, 2013? If so, should that notice be modified
to reflect the delay in the employer play-or-pay mandate? Similarly, what is
the relevance of information in the government’s model notice regarding details
of the employer’s group health plan in view of the delay in the play-or-pay
mandate?
§ If employers will not be
subject to the play-or-pay mandate in 2014, how will public health insurance
exchanges determine eligibility for the premium tax credit (recalling that
individuals are ineligible for the credit if they have been offered minimum
essential coverage that is affordable and of minimum value)?
§ Will the public health
insurance exchanges still be contacting employers in 2014 to verify employee
information (in some cases) on employees’ full-time status and health coverage
contributions (for purposes of the premium tax credit) — even though employers
will not be subject to penalties under the play-or-pay mandate? If so, will the
affordability and minimum value of employer coverage still need to be
determined in 2014 for purposes of the premium tax credit if those same
elements of the play-or-pay requirements are waived for employers in 2014?
§ How will the individual
mandate be affected by the delay in the employer play-or-pay mandate? Will
there now be political pressure to delay the individual mandate if the employer
play-or-pay mandate has effectively been deferred to 2015?
Meanwhile, it seems relatively clear
that other provisions of the PPACA that become effective in 2014 can proceed
without being affected by the one-year delay in the employer play-or-pay
mandate. For example, the annual distribution of Summaries of Benefits and
Coverage (SBCs), compliance with the new out-of-pocket maximum limits and
90-day waiting period limit on group health plans, as well as the annual
$63-per-covered-life, transitional-reinsurance fee do not appear to be affected
by the delay.
Employers should anticipate
questions and concerns from stakeholders about this latest development.
Employees, vendors, line supervisors, senior management, board members and
others will all react to media coverage of the delay, and some confusion should
be expected. Employers should begin to consider some thoughtful messaging about
this development even as we await details from the Treasury.
