United States: Listening And Learning—IRS Delays Reporting And Employer Shared Responsibility Requirements

On July 2, 2013, Mark Mazur, Assistant Secretary for Tax Policy at the Department of the Treasury, issued an unofficial blog post stating that businesses had raised concerns about the complexity of the health care reporting requirements of the Patient Protection and Affordable Care Act (the "Affordable Care Act") that were scheduled to become effective in 2014. In response to these concerns, Mr. Mazur confirmed that a decision was made to delay the reporting requirements for one year in order to give the IRS time to simplify the requirements. But the news gets better.

As a result of the delay in the reporting requirements, the effective date of the employer "shared responsibility" provisions was also delayed for one year. As a follow-up to the blog post, the IRS issued Notice 2013-45 (the "Notice") which provides transition relief for the reporting requirements as well as the employer shared responsibility provisions.

Summary of Delayed Provisions

Sections 6055 and 6056 of the Internal Revenue Code, which were added by the Affordable Care Act, require annual reporting relating to health coverage. Section 6055 requires reporting by entities, including health insurers and employers, that provide minimum essential coverage to an individual during a year. Section 6056 requires reporting by large employers (generally those employers that employ more than 50 full-time employees) that are subject to the shared responsibility provisions of Section 4980H of the Internal Revenue Code. Statements are also required to be provided to each person with respect to whom information is required to be reported under the foregoing sections. All reporting must be completed and statements provided for a year within specified time periods following the close of that year.

Section 4980H of the Code requires large employers to offer their full-time employees the opportunity to enroll in affordable minimum essential coverage (the so called "shared responsibility requirements"). Failure to do so could subject the employers to tax penalties.

Prior to the issuance of the Notice, the foregoing requirements were effective as of January 1, 2014 (with the first reporting and statements required in 2015). Significant work on the part of employers and health insurance issuers was required prior to that date in order to ensure compliance. The Notice delayed the effective date of these provisions until January 1, 2015 (with the first reporting and statements required in 2016). The delay does not impact the effective date of any other provisions of the Affordable Care Act.

Relief Provided by the Notice

As to the reporting requirements, the Notice states that proposed rules on the requirements are expected to be issued this summer and that reporting will be required for years beginning on and after January 1, 2015. The Notice, however, encourages providers to voluntarily comply with the reporting rules for 2014 once the revised rules have been issued in order to ensure a smooth transition and compliance in 2015.

The Notice states that the tax under Section 4980H will be assessed by the IRS based on the information returns that the IRS receives pursuant to the reporting requirements of Section 6056 and information that it receives about employees claiming premium tax credits. The IRS will contact the employer regarding the tax and the employer will have an opportunity to respond to the information before a tax is assessed.

Because the reporting requirements of Section 6056 have been delayed, the IRS has determined that it will not be practical to determine whether an employer owes a tax under Section 4980H. Accordingly, no such taxes will be assessed with respect to 2014.

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