Final Regulations Issued on Pension Protection Affordable Care Act's Employer Mandate

Affordable Care Act (ACA)|Tax

By John Kohler

On Monday February 10, 2014, the Internal Revenue Service (IRS) and Treasury Department issued final regulations regarding the Pension Protection Affordable Care Act's (PPACA) employer mandate provision.  The employer mandate provision states that if employers decline to offer insurance to their employees or if the insurance coverage they provide does not meet minimum required coverage established by the federal government, they are responsible for a shared responsibility payment.  These shared responsibility payments are being used to offset the cost to taxpayers of individuals receiving credit on the health insurance marketplace when employers do not provide the proper coverage.

The final regulations take effect for tax years beginning after December 31, 2014.  The regulations also provide that medium-sized employers (between 50 and 99 full-time employees) have until 2016 to comply with the shared responsibility payment provisions.  The regulations also state that large employers (greater than 100 full-time employees) must offer health insurance or provide minimum coverage to at least 70% of their full-time employees in 2015 to avoid the shared responsibility payments.  Beginning in 2016, employers with greater than 50 full-time employees must offer insurance to at least 95% of their full-time employees. Employers that have fewer than 50 full-time employees are not subject to the shared responsibility payment.

An employer may be liable for the shared responsibility payment if one or more of their full time employees are certified to the employer as receiving an applicable premium tax credit or cost-sharing reduction on the health insurance marketplace.  The payment is equal to the number of full time employees receiving credit or cost-sharing reduction multiplied by one twelfth of $3,000 for each calendar month that the employer does not provide the employee insurance coverage.

The IRS and Treasury Department are in the process of finalizing regulations on the employer information reporting requirements and expect that they will be completed shortly.  If you have questions about the Affordable Care Act, please contact one of our tax professionals.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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