IRS Finalizes Minimum Value Rule, Issues ACA Notice

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By Kristen Ricaurte Knebel

Dec. 16 — Rules on whether employer-provided health-care coverage meets affordability and minimum-value standards under the Affordable Care Act—and therefore whether workers are eligible for tax credits to help purchase coverage in the ACA exchanges—were finalized by the federal government.

The final regulations, released by the Treasury Department and Internal Revenue Service on Dec. 16, address issues such as the definition of taxpayers' modified adjusted gross income, employer wellness program incentives, employer contributions to health reimbursement arrangements and cafeteria plans, and post-employment coverage.

The final rules retain the proposed change to the definition of modified adjusted gross income, saying the proposed regulations “clarified that when a parent makes an election under section 1(g)(7), household income includes the child's gross income included on the parent's return only.”

For wellness program incentives, the final rules retain the stance from the proposed rules that “wellness incentives unrelated to tobacco use are treated as unearned and wellness incentives related to tobacco use are treated as earned in determining affordability,” the IRS said.

The final rules (T.D. 9745; RIN 1545-BL43) apply to taxable years that end in 2014 or later, the IRS said.

Notice 2015-87

Also on Dec. 16, the IRS issued guidance that aims to answer various questions related to the ACA.

In what is probably a response to many concerns about the upcoming ACA filing deadline, Notice 2015-87 reiterates that the IRS and Treasury have provided some relief for reporting under tax code Section 6056 related to coverage offered in the 2015 calendar year.

“The IRS will not impose penalties” under sections 6721 and 6722 for applicable large employers “that can show that they have made good faith efforts to comply with the information reporting requirements,” the notice said.

The notice also addresses previous IRS guidance from Notice 2013-54, which elaborated upon the application of certain provisions of the ACA to health reimbursement arrangements, flexible savings accounts and other employer-sponsored health-care arrangements.

The new notice also clarifies some areas of the employer shared-responsibility provisions, “including the identification of employee contributions when employers offer HRAs, flex credits, opt-out payments, or fringe benefit payments required under the McNamara-O'Hara Service Contract Act or other similar laws,” the IRS said.

The notice also addresses the application of the 9.5 percent affordability threshold for employer-provided health-care coverage to the safe harbor provisions under the employer mandate, and the employer status of certain entities for the purposes of the mandate, the IRS said.

The IRS and Treasury solicited comments on several parts of the notice, saying they plan to incorporate some of the notice's guidance into forthcoming proposed regulations. Comments on those questions are due by Feb. 18.

Notice 2015-87 supplements several pieces of guidance, including Notice 2013-54 and the 22nd set of frequently-asked-questions and answers on ACA implementation.

Except where stated, the notice's guidance is applicable for plan years beginning on or after Dec. 16.

For More Information


Text of the final rule is available at