A Treasury Department official recently announced that the President’s administration will delay until 2015 the Affordable Care Act (ACA) requirement that employers and insurers report information on each employee that receives health coverage and the terms and conditions of that coverage.
The reason given is to allow federal agencies to work with employers to simplify reporting requirements before new regulations are released this summer. Treasury promises a dialogue with employers and stakeholders to accomplish this.
The lack of reporting, which was intended to be accomplished through returns filed by employers, makes it impracticable for the federal government to enforce the employer responsibility (Pay or Play) mandates. As a result, those are also delayed for another year. That includes the $2,000 penalty for not offering any coverage, as well as the $3,000 penalty for not offering “affordable” or “minimum value” coverage.
What does this mean for employer plans?
Unfortunately, formal guidance issued by the IRS this week was painfully short on details, meaning that once again we have to wait for further guidance to be released before we can understand the full impact. For example, an unanswered question is whether employers have any reason to calculate hours for workers now, beyond being prepared for 2015.
In the meantime, we can still draw some conclusions:
- The notice delays only three sections of the ACA, two relating to reporting and the third relating to employer responsibility penalties. No other ACA provisions were impacted, including the individual mandate and the availability of subsidies on an exchange if an income-eligible employee is not offered employer coverage, the coverage is deemed “unaffordable” or it does not meet the minimum value requirement.
- While the absence of penalties and reporting means that employers may not feel compelled to provide information to employees about affordability or minimum value, employees will still be interested in this information if they apply for exchange coverage. Employees who apply will have to attest to whether their plan meets certain conditions during the application process and will be given a form they can ask their employer to complete. It is unclear whether employers will be required to complete the form, and this is an area that may be addressed by future regulations.
- Employees that provide misinformation to exchanges in order to receive subsidies are subject to penalties and may be required to repay any excess subsidy they received.
- The delay presumably provides employers with the opportunity to understand which of their employees may seek exchange coverage. Of course, this may be dependent on the employee sharing this information with their employer, as exchanges may or may not be verifying information about employer coverage in 2014.
- When federal agencies begin the promised “dialogue with stakeholders,” it is critical that employers burdened with Affordable Care Act compliance voice their frustrations and concerns. The President’s administration would not have delayed this high profile provision if it were not interested in simplifying and easing burdens for employers.
- While calculating employee hours is a painful exercise for some companies, the additional year provides extra time to make workforce adjustments and streamline the administration of measurement periods. It may also provide new “windows” for measurement, although uncertainties exist as to whether these requirements will change before 2015. Employers need better guidance on seasonal workers.
- A full repeal of Employer Responsibility penalties is a long shot in my view, but the delay provides additional time for Congress to try and agree on “tweaks” to the ACA such as changing the definition of full-time to 40 hours.
- It is highly doubtful that employers that have historically offered health benefits to employees will decide to drop coverage as a result of the delay, but it is possible that employers that don’t currently offer coverage will delay their decision for another year. Part-time workers will be impacted the most, as those working over 30 hours may escape having their hours cut (for now) or may not be offered coverage that they might otherwise have been offered.
- The Treasury will be an estimated $10 billion smaller in 2015 as a result of not collecting projected penalties as a result of Pay or Play.
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