IRS Explains Transition Relief in Response to ACA Delay

Following the adoption of the Affordable Care Act, sections of the IRS code were added in response to federal legal requirements. These sections, in part, require annual health reporting by large employers and annual reporting by health insurance providers, self-insuring employers, government agencies and other providers of health coverage.

Earlier this month, the Obama Administration announced a one-year delay in the effective date of these reporting requirements, including the effective date for employer shared responsibility provisions.

Last week, the IRS published Notice 2013-45, which explains the transition relief available in 2014. IRS Notice 2013-45 explains that the relief provides extra time for large employers and other reporting entities to adapt their health coverage and reporting systems in an effort to simplify the information reporting required for effective implementation of the ACA.

In the notice, the IRS said,

Both the information reporting and the Employer Shared Responsibility Provisions will be fully effective for 2015. In preparation for that, once the information reporting rules have been issued, employers and other reporting entities are encouraged to voluntarily comply with the information reporting provisions for 2014.

This transition relief through 2014 for the information reporting and Employer Shared Responsibility Provisions has no effect on the effective date or application of other Affordable Care Act provisions.

Transition Relief

Q: When will the rules be published regarding § 6055 Information Reporting and § 6056 Information Reporting? How will these provisions apply for 2014?

Proposed rules for the information reporting provisions are expected to be published this summer. Information reporting under §§ 6055 and 6056 will be optional for 2014; accordingly, no penalties will be applied for failure to comply with these information reporting provisions for 2014. For the full IRS Notice regarding this policy, please refer to Notice 2013-45.

Q: What does the 2014 transition relief for § 6056 Information Reporting mean for application of the Employer Shared Responsibility Provisions for 2014?

Because an employer typically will not know whether a full-time employee received a premium tax credit, the employer will not have all of the information needed to determine whether it owes a payment under § 4980H.

Therefore, the employer is not required to calculate a penalty payment with respect to § 4980H or file returns submitting such a payment.

Instead, after receiving the information returns filed by applicable large employers under § 6056 and the information about employees claiming the premium tax credit for any given calendar year, the Internal Revenue Service (IRS) will determine whether any of the employer’s full-time employees received the premium tax credit and, if so, whether an assessable payment under § 4980H may be due.

If the IRS concludes that an employer may owe such an assessable payment, it will contact the employer, and the employer will have an opportunity to respond to the information the IRS provides before a payment is assessed.

For this reason, the transition relief from § 6056 Information Reporting for 2014 is expected to make it impractical to determine which employers owe shared responsibility payments for 2014 under the Employer Shared Responsibility Provisions. Accordingly, no employer shared responsibility payments will be assessed for 2014.

Q: Does this affect employees’ access to the premium tax credit?

No. Individuals will continue to be eligible for the premium tax credit by enrolling in a qualified health plan through the Affordable Insurance Exchanges (e.g. Covered California) if their household income is within a specified range and they are not eligible for other minimum essential coverage, including an eligible employer-sponsored plan that is affordable and provides minimum value.

Q: What does this mean for other provisions in the Affordable Care Act?

This transition relief is for IRS Sections § 6055 (Information Reporting) IRS Section § 6056 (Information Reporting) and the Employer Shared Responsibility Provisions. This relief has no effect on the effective date or application of any other Affordable Care Act provisions, including the Employee Notification due October 1, the timing of exchanges opening, or the 90-day maximum waiting period beginning in 2014.

Q: Where can I go for help? 

PAYDAY Workforce Solutions is ready to help you get ready for ACA compliance regulations. Don’t take the risk of falling out of compliance. Let us show you how we can simplify the information reporting provisions and assist you in real-world testing of your healthcare reporting and plan designs. We want to ensure you have a smooth transition when full implementation of ACA becomes effective in 2015. Call us at the number on this page or fill out this form to start the conversation with one of our friendly payroll healthcare specialists.

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About the Author:

As Director of Operations, Jessica oversees the day-to-day operations for payroll, human resources, tax, finance and client affairs. She also plays an active role in formulating corporate strategy and developing client programs. Jessica believes a company’s success begins with its people. She strives to build a team encompassing excellence and professionalism, and to play a large role in developing the staff on an ongoing basis. Her passion for strong client relationships drives her in ensuring that clients receive the highest level of personal service and the best products in the industry. Jessica joined PAYDAY in 2004, and quickly advanced to Development Coordinator in 2006, when she took charge of Human Resources. She was promoted to Director of Operations in September, 2011.

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