Shared Responsibility for Employers

1513 - Shared Responsibility for Employers

Summary

Amended by section 10106 of the Senate Manager’s Amendment and section 1002 of HCERA. For employers with at least 50 full-time employees that do not offer qualifying coverage, if at least one full-time employee qualifies for premium tax credits to purchase insurance in an exchange, the employer must pay a penalty of $2000 for each of all of their full-time employees (with the first 30 employees exempted from the calculation).

For employers with 50+ employees who do offer coverage but still have at least one employee who qualifies for a premium tax credit (due to inadequacy or unaffordability of the employer’s benefit), the employer must pay the lesser of $3000 for each employee receiving the credit or $2000 for each of all of their full-time employees (with, again, the first 30 employees exempted).

Requires the Department of Labor to furnish a study regarding whether employee wages are reduced as a result of the penalty payments made under the employer mandate.

#Employer Mandate

Implementation Status

Summary

Statutory Text

2012

On February 9, 2012, the Department of Labor posted a Technical Release/FAQ regarding the employer shared responsibility requirement, among other guidance.

On December 28, 2012, the IRS issued a proposed rule governing implementation of this employer mandate provision. That same day, the IRS issued an FAQ on this topic.

2013

On March 5, 2013, the House Ways and Means Oversight Subcommittee held a hearing on ACA “tax and tax-related provisions” in which employer representatives testified about penalties under this section. More information is available here. On March 19, House Education and the Workforce Committee Chairman John Kline (R-MN) and Rep. Phil Roe (R-TN), Chair of the Subcommittee on Health, Employment, Labor and Pensions, wrote a letter to DOL inquiring about the ACA’s required report on employer shared responsibility payments’ impact on workers’ wages.

On April 30, 2013, the IRS released a proposed rule regarding the minimum value (MV) of eligible employer-sponsored plans and other issues related to the health insurance premium tax credit. The rule addresses several considerations relating to calculating MV and assessing affordability of employer-sponsored coverage, as factors related to employees’ eligibility to access subsidies in the Exchange, including such issues as wellness program incentives and HRA contributions.

On July 2, in a blog posting on the Treasury Department’s website, the Administration announced the delay – until 2015 – of mandatory insurer and employer information reporting requirements and thus also postponed enforcement of the employer mandate and associated penalties.

On July 9, Assistant Secretary of the Treasury for Tax Policy Mark Mazur wrote to Rep. Fred Upton (R-MI), Chairman of the Energy and Commerce Committee, regarding the employer mandate and information reporting requirement delay, citing the Department’s “longstanding administrative authority to grant transition relief when implementing new legislation like the ACA.”

On July 9, the IRS released a Notice providing transition relief for 2014 from information reporting and the employer mandate – with no reporting requirements or penalties until 2015, although voluntary reporting in 2014 is encouraged – while noting that this release has “no effect on the effective date or application of other Affordable Care Act provisions,” including Exchange subsidies or the individual mandate.

On July 9, congressional Republicans wrote to President Obama inquiring about the employer mandate delay.

On July 10, congressional Republican leaders sought a CBO estimate of the delays’ budgetary effects.

Several congressional committees held hearings on the delays, including two by the House Ways and Means Health Subcommittee on July 10 (testimony) and July 17 (testimony), the latter of which included a Treasury Department official. The House Energy and Commerce Oversight and Investigations Subcommittee held a hearing on July 18 at which J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary for Retirement and Health Policy, testified. On July 23, the House Education and Workforce Subcommittee on Health, Employment, Labor, and Pensions – as well as the Subcommittee on Workforce Protections – held a joint hearing, “Examining the Delay and Its Effect on Workplaces.”

On July 30, the Congressional Budget Office today released an analysis estimating that the Administration’s recently announced 1-year delay of employer and insurer information reporting requirements and employer mandate penalties will increase the net federal cost of the Affordable Care Act’s coverage-related provisions by $12B over 10 years.

In an August 2013 letter to Treasury Secretary Jack Lew, House Republicans followed up on their July request for additional information on the Department’s decision to delay enforcement of the employer mandate. Also see a press release here.

On September 9, following the one-year delay of employer mandate enforcement and associated information reporting requirements, the IRS published a proposed rule on information reporting for applicable large employers under section 6056 of the Internal Revenue Code (IRC) relating to employers’ offers of health insurance coverage and employee statements used in premium tax credit administration, among other requirements, as well as a proposed rule on information reporting for those offering minimum essential coverage. A Treasury Department fact sheet included farther below provides an overview of select provisions of both rules, including specific proposals the Department says present a “variety of options to potentially reduce or streamline information reporting.” The IRS proposes that these information requirements take effect for calendar years (CYs) beginning after December 31, 2014 (i.e., in CY 2015)—affirming previously issued transition relief; voluntary compliance is encouraged for 2014. Comments are due on November 8.

On September 17-18, DOL held webinars on ACA compliance; they are available in archived form, and registration is required. In the first call, DOL discussed final regulations on employer wellness programs, while Treasury presented on the employer mandate. In the second call, DOL discussed the ACA requirement to provide employees with a Notice of Marketplace Coverage Options, and HHS presented on Marketplaces and SHOPs.

On October 9, a House Committee on Small Business Subcommittee on Health and Technology hearing examined the ACA‘s full-time worker definition from small businesses’ perspective, including implications for hiring and worker hours, among other factors.

On Nov. 14, 2013 the House Education and Workforce Committee held a hearing on the ACA’s effects on schools and universities examining, among other issues, the impact of the definition of full-time workers.

On Dec. 4, 2013 the House Small Business Committee held a hearing assessing the effects on small businesses of ACA rules for determining if employers are treated as single or multiple entities for purposes of complying with the ACA’s employer mandate. Materials are available here.

2014

On Jan. 10, 2014 in a blog post, Treasury indicated that in forthcoming employer mandate-related rulemaking, it will not require the inclusion of “volunteer hours of bona fide volunteer firefighters and volunteer emergency medical personnel at governmental or tax-exempt organizations” in computations of full-time employees or full-time equivalents, which would be used for assessing entities’ compliance with the employer mandate.

On Jan. 28, 2014 the House Ways and Means Committee held a hearing on the employer mandate; Republicans and several witnesses drew attention to the “30-hour rule” for defining full-time work in the context of employer mandate compliance. Materials, including witness testimony, is here; for video, see here, under full Committee webcasts.

On Feb. 10, in a highly anticipated final rule (fact sheet) on the employer mandate, the IRS finalizes 2015 implementation – delayed from 2014 – on a phased-in basis only for employers with 100 or more employees beginning with 70% of full-time employees in 2015 and ramping up to 95% in “2016 and beyond,” with such employers subject to penalties starting in 2015. The rule delays the employer mandate and applicable penalties until 2016 for employers with 50-99 employees (eligibility conditions apply, such as maintenance of workforce and previously offered coverage), although reporting provisions will apply to such entities in 2015. Treasury also issued a press release describing the final rule’s provisions. On Feb. 12, Several House Republican leaders asked Treasury to provide documentation relating to its decision to delay employer mandate penalties for certain firms and phase-in requirements for others.

On March 18, citing passages of a January 2014 transcribed interview with a Treasury official (release), Committee Republicans wrote a letter seeking additional context on the Administration’s decision to further postpone certain elements of the employer mandate. On March 6, the Small Business Administration posted an updated timeline reflecting the new employer mandate phase-in, among other provisions’ applicability to small employers.

On April 8, Mark Iwry, a senior Treasury official, testified at a House Ways and Means Committee hearing on final employer mandate rules. According to news reports (Reuters), Iwry said the Administration does support individual mandate delay and has not evaluated authority to do so.

On July 24, 2014, the IRS released draft tax forms to be used for reporting health coverage status, including an employer’s compliance with the ACA’s employer mandate, construed as evidence that the Administration is moving forward with the employer mandate after having delayed it. The IRS said “we anticipate that draft instructions relating to the forms will be posted to IRS.gov in August,” adding “both the forms and instructions will be finalized later this year.” Forms include:

1095-B: Health Coverage (draft) for providing to enrollees
1095-C: Employer-Provided Health Insurance Offer and Coverage (draft) for large employer information reporting
1095A: Health Insurance Marketplace Statement (draft) for Marketplace reporting to enrollees and the IRS
1094-C: Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns (draft)

On Nov. 21, House Republicans filed a lawsuit challenging the Administration’s delay of the ACA employer mandate and making of cost-sharing reduction payments, saying the latter lack congressional appropriation.

On Jan. 22, 2015, the Senate HELP Committee held a hearing on the Save American Workers Act of 2015 (H.R. 30), a bill to amend the Internal Revenue Code to define a “full time employee” as a person working 40 hours a week, rather than 30 hours a week, as mandated by the ACA. On Jan. 7, 2015, CBO released a score saying the House bill (H.R. 30) changing the ACA employer mandate rule from 30 hours to 40 hours would increase the federal deficit by $53.2 billion between 2015 and 2025. On Jan. 1, 2015, the employer mandate took effect for entities with 100 full-time equivalent employees, as noted in #2 here, with 2016 applicability for employers of at least 50.

On Apr. 14, the House Ways and Means Health Subcommittee held a hearing on the ACA’s individual and employer mandates.

On May 6, the IRS highlighted the approach to determining applicable large employers for the mandate and information reporting requirements.

On May 8, the Treasury Inspector General for Tax Administration issued a report finding that IRS’ delay in employer and insurer information reporting “reduces the IRS’s ability to determine whether taxpayers and their dependents” have ACA minimum essential coverage.” It explores the agency’s individual mandate enforcement mechanisms and recommends that the penalty calculator, known as the Shared Responsibility Payment Calculation Tool, be added to IRS.gov for the 2016 filing year.

On June 3, the IRS released a tax tip, “ACA and Employers: How Seasonal Workers Affect Your [Applicable Large Employer] Status.”

On July 30, in a “tax tip,” IRS explains the employer mandate and associated information reporting requirements.

On Sept. 29, the House Ways and Means Committee advanced reconciliation legislation that would repeal the individual and employer mandates, among other provisions.

On Sept. 18, CCIIO explained its 2016 phase-in of employer notice requirements in Federally Facilitated Marketplaces.

On Sept. 22, the IRS posted a “tax tip” on “The Importance of Workforce Size under the Employer Shared Responsibility Provisions.”

On Sept. 23, the IRS posted a “tax tip” on “How Coverage You Offer (or Don’t Offer) May Mean an Employer Shared Responsibility Payment for Your Organization.

2016

On May 11, the IRS posted a “tax tip” titled “Why Employers Need to Count Employees.”

On June 30, the IRS posted a podcast-based overview of the employer mandate.

2017

On April 10, the Treasury Inspector General for Tax Administration released a report on employer mandate implementation and made seven recommendations regarding the IRS’ processing of Forms 1094-C and 1095-C.

Statutory Text

Implementation Status

Summary

SEC. 1513. SHARED RESPONSIBILITY FOR EMPLOYERS.
(a) IN GENERAL.—Chapter 43 of the Internal Revenue Code of
1986 is amended by adding at the end the following:
‘‘SEC. 4980H. SHARED RESPONSIBILITY FOR EMPLOYERS REGARDING
HEALTH COVERAGE.
‘‘(a) LARGE EMPLOYERS NOT OFFERING HEALTH COVERAGE.—
If—
‘‘(1) any applicable large employer fails to offer to its fulltime
employees (and their dependents) the opportunity to enroll
in minimum essential coverage under an eligible employer-sponsored
plan (as defined in section 5000A(f)(2)) for any
month, and
‘‘(2) at least one full-time employee of the applicable large
employer has been certified to the employer under section 1411
of the Patient Protection and Affordable Care Act as having enrolled
for such month in a qualified health plan with respect
to which an applicable premium tax credit or cost-sharing reduction
is allowed or paid with respect to the employee,
then there is hereby imposed on the employer an assessable payment
equal to the product of the applicable payment amount and
the number of individuals employed by the employer as full-time
employees during such month.
[‘‘(b) LARGE EMPLOYERS WITH WAITING PERIODS EXCEEDING 60
DAYS.—[Replaced first by section 10106(e) and stricken by section
1003(d) of HCERA and succeeding subsections were redesignated
Accordingly]]
‘‘(b) LARGE EMPLOYERS OFFERING COVERAGE WITH EMPLOYEES
WHO QUALIFY FOR PREMIUM TAX CREDITS OR COST-SHARING REDUCTIONS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) an applicable large employer offers to its full-time
employees (and their dependents) the opportunity to enroll
in minimum essential coverage under an eligible employer-sponsored
plan (as defined in section 5000A(f)(2)) for any
month, and
‘‘(B) 1 or more full-time employees of the applicable
large employer has been certified to the employer under
section 1411 of the Patient Protection and Affordable Care
Act as having enrolled for such month in a qualified health
plan with respect to which an applicable premium tax
credit or cost-sharing reduction is allowed or paid with respect
to the employee,
then there is hereby imposed on the employer an assessable
payment equal to the product of the number of full-time employees
of the applicable large employer described in subparagraph
(B) for such month and an amount equal to 1⁄12 of
$3,000. [As revised by section 1003(b)(1) of HCERA]
‘‘(2) OVERALL LIMITATION.—The aggregate amount of tax
determined under paragraph (1) with respect to all employees
of an applicable large employer for any month shall not exceed
the product of the applicable payment amount and the number
of individuals employed by the employer as full-time employees
during such month.
‘‘(3) SPECIAL RULES FOR EMPLOYERS PROVIDING FREE
CHOICE VOUCHERS.—[As added by section 10108(i)(1)] No assessable
payment shall be imposed under paragraph (1) for any
month with respect to any employee to whom the employer
provides a free choice voucher under section 10108 of the Patient
Protection and Affordable Care Act for such month.
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For purposes of this
section—
‘‘(1) APPLICABLE PAYMENT AMOUNT.—The term ‘applicable
payment amount’ means, with respect to any month, 1⁄12 of
$2,000. [As revised by section 1003(b)(2) of HCERA]
‘‘(2) APPLICABLE LARGE EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘applicable large employer’
means, with respect to a calendar year, an employer
who employed an average of at least 50 full-time
employees on business days during the preceding calendar
year.
‘‘(B) EXEMPTION FOR CERTAIN EMPLOYERS.—
‘‘(i) IN GENERAL.—An employer shall not be considered
to employ more than 50 full-time employees if—
‘‘(I) the employer’s workforce exceeds 50 fulltime
employees for 120 days or fewer during the
calendar year, and
‘‘(II) the employees in excess of 50 employed
during such 120-day period were seasonal workers.
‘‘(ii) DEFINITION OF SEASONAL WORKERS.—The
term ‘seasonal worker’ means a worker who performs
labor or services on a seasonal basis as defined by the
Secretary of Labor, including workers covered by section
500.20(s)(1) of title 29, Code of Federal Regulations
and retail workers employed exclusively during
holiday seasons.
‘‘(C) RULES FOR DETERMINING EMPLOYER SIZE.—For
purposes of this paragraph—
‘‘(i) APPLICATION OF AGGREGATION RULE FOR EMPLOYERS.—All
persons treated as a single employer
under subsection (b), (c), (m), or (o) of section 414 of
the Internal Revenue Code of 1986 shall be treated as
1 employer.
‘‘(ii) EMPLOYERS NOT IN EXISTENCE IN PRECEDING
YEAR.—In the case of an employer which was not in
existence throughout the preceding calendar year, the
determination of whether such employer is an applicable
large employer shall be based on the average number
of employees that it is reasonably expected such
employer will employ on business days in the current
calendar year.
‘‘(iii) PREDECESSORS.—Any reference in this subsection
to an employer shall include a reference to any
predecessor of such employer.
[Previous subparagraph (D), relating to application to construction
industry employers, added by section 10106 but replaced, as
shown below, by section 1003(a) of HCERA]
‘‘(D) APPLICATION OF EMPLOYER SIZE TO ASSESSABLE
PENALTIES.—
‘‘(i) IN GENERAL.—The number of individuals employed
by an applicable large employer as full-time
employees during any month shall be reduced by 30
solely for purposes of calculating—
‘‘(I) the assessable payment under subsection
(a), or
‘‘(II) the overall limitation under subsection
(b)(2).
‘‘(ii) AGGREGATION.—In the case of persons treated
as 1 employer under subparagraph (C)(i), only 1 reduction
under subclause (I) or (II) shall be allowed with
respect to such persons and such reduction shall be allocated
among such persons ratably on the basis of the
number of full-time employees employed by each such
person.
‘‘(E) FULL-TIME EQUIVALENTS TREATED AS FULL-TIME
EMPLOYEES.—[As added by section 1003(c) of HCERA]
Solely for purposes of determining whether an employer is
an applicable large employer under this paragraph, an employer
shall, in addition to the number of full-time employees
for any month otherwise determined, include for such
month a number of full-time employees determined by dividing
the aggregate number of hours of service of employees
who are not full-time employees for the month by 120.
‘‘(3) APPLICABLE PREMIUM TAX CREDIT AND COST-SHARING
REDUCTION.—The term ‘applicable premium tax credit and
cost-sharing reduction’ means—
‘‘(A) any premium tax credit allowed under section
36B,
‘‘(B) any cost-sharing reduction under section 1402 of
the Patient Protection and Affordable Care Act, and
‘‘(C) any advance payment of such credit or reduction
under section 1412 of such Act.
‘‘(4) FULL-TIME EMPLOYEE.—
‘‘(A) IN GENERAL.—[As revised by section 10106(f)(1)]
The term ‘full-time employee’ means, with respect to any
month, an employee who is employed on average at least
30 hours of service per week.
‘‘(B) HOURS OF SERVICE.—The Secretary, in consultation
with the Secretary of Labor, shall prescribe such regulations,
rules, and guidance as may be necessary to determine
the hours of service of an employee, including rules
for the application of this paragraph to employees who are
not compensated on an hourly basis.
‘‘(5) INFLATION ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of any calendar year
after 2014, each of the dollar amounts in subsection (b)
and paragraph (1) shall be increased by an amount equal
to the product of—[As revised by section 1003(a)(3) of
HCERA]
‘‘(i) such dollar amount, and
‘‘(ii) the premium adjustment percentage (as defined
in section 1302(c)(4) of the Patient Protection
and Affordable Care Act) for the calendar year.
‘‘(B) ROUNDING.—If the amount of any increase under
subparagraph (A) is not a multiple of $10, such increase
shall be rounded to the next lowest multiple of $10.
‘‘(6) OTHER DEFINITIONS.—Any term used in this section
which is also used in the Patient Protection and Affordable
Care Act shall have the same meaning as when used in such
Act.
‘‘(7) TAX NONDEDUCTIBLE.—For denial of deduction for the
tax imposed by this section, see section 275(a)(6).
‘‘(d) ADMINISTRATION AND PROCEDURE.—
‘‘(1) IN GENERAL.—Any assessable payment provided by
this section shall be paid upon notice and demand by the Secretary,
and shall be assessed and collected in the same manner
as an assessable penalty under subchapter B of chapter 68.
‘‘(2) TIME FOR PAYMENT.—The Secretary may provide for
the payment of any assessable payment provided by this section
on an annual, monthly, or other periodic basis as the Secretary
may prescribe.
‘‘(3) COORDINATION WITH CREDITS, ETC..—The Secretary
shall prescribe rules, regulations, or guidance for the repayment
of any assessable payment (including interest) if such
payment is based on the allowance or payment of an applicable
premium tax credit or cost-sharing reduction with respect to an
employee, such allowance or payment is subsequently disallowed,
and the assessable payment would not have been required
to be made but for such allowance or payment.’’.
(b) CLERICAL AMENDMENT.—The table of sections for chapter
43 of such Code is amended by adding at the end the following new
item:
‘‘Sec. 4980H. Shared responsibility for employers regarding health coverage.’’.
(c) STUDY AND REPORT OF EFFECT OF TAX ON WORKERS’
WAGES.—
(1) IN GENERAL.—The Secretary of Labor shall conduct a
study to determine whether employees’ wages are reduced by
reason of the application of the assessable payments under section
4980H of the Internal Revenue Code of 1986 (as added by
the amendments made by this section). The Secretary shall
make such determination on the basis of the National Compensation
Survey published by the Bureau of Labor Statistics.
(2) REPORT.—The Secretary shall report the results of the
study under paragraph (1) to the Committee on Ways and
Means of the House of Representatives and to the Committee
on Finance of the Senate.
(d) EFFECTIVE DATE.—The amendments made by this section
shall apply to months beginning after December 31, 2013.

1513 - Shared Responsibility for Employers

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