ACA Implementation to Take Center Stage for Employers in 2014

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By Kristen Ricaurte Knebel  

Jan. 17 --Implementation of the Affordable Care Act will be a top priority for employers in 2014, with the expectation that the Internal Revenue Service and Treasury Department will issue the final employer-shared responsibility rules under tax code Section 4980H early in the year, practitioners and benefits groups told Bloomberg BNA in interviews in early January.

Final rules on employer-shared responsibility under Section 4980H and the related reporting rules under sections 6055 and 6056 are by far the most anticipated ACA-related regulations for employers.

“One of the big developments [of 2014] is going to be the final regulations on employer-shared responsibility. The regs are fairly complex and I think there are a lot of unanswered questions,” Christine L. Keller, a principal at Groom Law Group Chartered in Washington, told Bloomberg BNA Jan. 8.

James A. Klein, president of the American Benefits Council, told Bloomberg BNA Jan. 7 that the employer-shared responsibility provisions and the related reporting rules are the biggest piece of the Affordable Care Act puzzle for employers and as soon as they are issued, employers will be spending a lot of time in analysis and implementation mode.

Depending on how the final rules are “structured, employers are going to be spending a lot of time evaluating those and making sure that they're in compliance with them as soon as necessary,” Klein said.

Employer Shared-Responsibility

Under Section 4980H, large employers may face penalties if they don't offer full-time employees and their dependents affordable, minimum value health care coverage and if at least one of their employees receives a premium tax credit or reduced-cost health insurance through a state exchange or federally administered exchange (01 PBD, 1/2/13; 40 BPR 74, 1/8/13).

The reporting rules under Section 6055 require health insurance issuers, sponsors of self-insured health plans and other entities to report information to the IRS on each full-time employee to whom they provided minimum essential health insurance coverage. Section 6056 requires employers to report to the IRS information about their compliance with the employer shared-responsibility provisions under tax code Section 4980H and about the health-care coverage they offer employees.

While the proposed rules under Section 4980H were issued in late 2012 and were set to take effect on Jan. 1, 2014, the Obama administration announced in July 2013 that it was delaying for one year the mandatory reporting requirements for employers and health insurers, as well as related employer shared-responsibility penalties, under the ACA (128 PBD, 7/3/13; 40 BPR 1631, 7/9/13).

“That'll be a big item for employers to get those rules [and] work on systems. I think right now employers are viewing the delay in the effective date on those rules as something that gives them an opportunity to start tracking this year sort of as a practice even though next year there wouldn't be any penalties,” Keller said.

Helen H. Morrison, a principal in the national tax department at EY in Washington and a former deputy benefits tax counsel in the Treasury Department's Office of Tax Policy, told Bloomberg BNA Jan. 7 that employers are “anxious to see the final regulations under Section 4980H,” but depending on when the rules ultimately are released, “there will be an open question whether Treasury and IRS will feel pressure, or whether there will be pressure on them to delay the implementation of those provisions beyond 2015. The real critical issue early this year is how quickly we will see that guidance.”

Morrison said she has heard the employer-shared responsibility rules are “very close to final, if not final,” but that they are still making their way through the clearance process.

Regardless of when the rules come out, Morrison said, “I'm sure that there's no interest on the part of the administration to delay further a law that is effective.”

Gretchen K. Young, senior vice president for health policy at the ERISA Industry Committee, told Bloomberg BNA Jan. 7 that after the final rules are released, “I hope that we're going to be in a posture of being able to sit back” and work on implementation of the final rules and “make our final changes to our systems and our strategies, at least for the short term, without a bunch of new rules coming in every couple of months which has been really difficult.”

Young said once the final employer-shared responsibility regulations and the reporting rules under sections 6055 and 6056 come out and systems are set, employers will probably set their sights on the Cadillac tax that is scheduled to be imposed on some plans beginning in 2018.

The Cadillac tax will levy a 40 percent excise tax on health coverage costs exceeding $10,200 for single coverage and $27,500 for family coverage beginning in 2018 (185 PBD, 9/23/11; 38 BPR 1755, 9/27/11).

Steve Wojcik, vice president of public policy for the National Business Group on Health, told Bloomberg BNA Jan. 7 that with the Cadillac tax “looming in 2018,” many employers have already started examining their health plans to see if they could be subject to the tax.

“It's four years away and employers pretty much know based on working their trends forward to 2018 where they stand and so they have another year to make changes, to make sure they stay under the threshold so they're not taxed on that 40 percent tax above the threshold,” he said.

Pulling the 'Jenga Blocks.'

Though many hoped the employer-shared responsibility final rules would come out late in 2013 to give employers plenty of time to comply with the final rules, Young doesn't think that means the provisions will be delayed a second time.

“I would be surprised if they would delay it past 2015 because at some point you're starting to pull the Jenga blocks. You pull out the bottom one and the whole thing is going to collapse at some point. That would mean I think that people would really start to lose faith that they were going to enforce any of their rules,” Young said.

With a further delay unlikely, the more time that passes before the IRS and Treasury issue the final Section 4980H and reporting rules, the more difficult compliance will be for employers, Young said.

“The uncertainty is difficult to live with and it's very hard to plan if you don't know what's going to happen. The real problem is going to come if they were to not come out with these rules until March or April or May and they changed what we thought they were going to be, or if they put in some new rules that were really hard to integrate into our workplaces. That would make things really difficult,” she said.

Keller agreed that the reporting rules will most likely not be delayed another year, although she allowed that “there's always a chance.”

“I think there was a lot of pushback on that delay. Politically, I think people were wondering why the agency did that. Although there was certainly a lot of precedent for an agency to delay a rulemaking, but I would suspect they would probably move forward,” she said.

Wojcik said while the employer mandate probably won't be delayed another year, if other pieces of the ACA start to break down, particularly if the administration doesn't work out the kinks in the state health insurance marketplaces, lawmakers may contemplate tinkering with the law.

“In the larger picture, if things are still rocky with the exchanges and there's a desire in Congress to delay other parts of the health care law, or make other changes, it's possible that the employer mandate could be swept up into that and have some further delays, but it probably wouldn't be the result of regulations coming out unless they're so late,” Wojcik said.

If for some reason the final rules don't come out until late spring or early summer, Wojcik said that could leave the door open for further delay of the mandate, “because most big employers need that much lead time to make major changes in their health plans.”

James A. Klein, president of the American Benefits Council, told Bloomberg BNA Jan. 7 that regardless of how people feel about the ACA, many are now moving away from thoughts of repeal and toward trying to figure out how to live with it.

“Whether various interest groups like or don't like the ACA, I think there's sort of broad acknowledgement among employers, insurers, health-care providers, the public at large, states, that the law is here to stay. Therefore I think now that we're in 2014 as the main implementation year, there will be more serious focus on pursuing ideas to try to improve the law and make it more administrable,” Klein said.

“It does not appear that the political environment is there to move forward with significant legislative changes, but I think that a very serious dialogue is going to get started this year on the kinds of improvements that ought to be considered,” he said.

Reporting Rules

While the proposed employer-shared responsibility rules allow employers to rely on them until final rules come out, the proposed reporting rules under sections 6055 and 6056 were less clear, Young said.

Section 6056, which was added by the ACA, requires employers to report to the IRS information about their compliance with the employer shared-responsibility provisions under Section 4980H and about the health-care coverage they offer employees. It also will require them to provide workers with statements employees can use to determine whether they are eligible for premium tax credits when they buy coverage through ACA exchanges, or marketplaces.

Section 6055 requires health insurance issuers, sponsors of self-insured health plans and government agencies that administer government-sponsored health insurance programs to submit annual returns to the IRS with information on each full-time employee to whom they provided minimum essential health insurance coverage during the tax year for which they are reporting.

On Sept. 5, 2013, the IRS and Treasury released proposed rules (REG-136630-12) implementing the ACA information reporting requirements under Section 6056 for insurers and certain employers (173 PBD, 9/6/13; 40 BPR 2137, 9/10/13).

The same day, they released proposed rules (REG-132455-11) providing guidance on the reporting of minimum essential health coverage under Section 6055 (173 PBD, 9/6/13; 40 BPR 2138, 9/10/13).

“We really don't know what they are going to do. The proposed reg. was rather light on details and had some suggestions that didn't really work very well. So we're hoping there's going to be a more significant change there, and if that's going to occur or not I'm not sure,” Young said.

Keller agreed that the proposed rules left something to be desired, saying, “The general view is that the first set of proposed rules didn't give quite enough information for employers to really start doing anything with respect to their systems or really taking hardly any steps at all. I think people view those rules as very preliminary.”

ERISA Preemption?

One unintended consequence of the ACA that some are eyeing has to do with the possible “erosion” of the “federal framework that employers rely upon,” which is the Employee Retirement Income Security Act, ABC's Klein said.

“It's very significant for the employer community. There isn't yet the evidence of a lot of this activity, but I would put this on the early warning system for everyone,” Klein said.

Klein said ERISA is “crucial” for large employers operating in multiple states and its framework “could be eroded because the ACA requires so many decisions to be made by the states.”

One particular piece of the ACA that could chip away at ERISA's preemption feature has to do with a provision giving states the opportunity to innovate with their health insurance marketplaces starting in 2017, Klein said.

The Department of Health and Human Services and Treasury issued a final rule on the state innovation waivers on Feb. 22, 2012, allowing states to request the waivers beginning in 2017 if they demonstrate they can cover as many residents with coverage as comprehensive and as affordable as would be provided under the ACA (35 PBD, 2/23/12; 39 BPR 407, 2/28/12).

“If the federal agencies view that waiver authority very narrowly, then it's probably not going to be a real big deal for multistate employers, but if they view it very broadly, it could really erode the federal framework that employers rely upon,” he said.

In addition to the state innovation waivers, Klein said there will be pressure on the states in the coming years to raise money, which could cause states to ask Congress to make changes to ERISA to “give them more opportunity to extract money from large self-insured plan sponsors.”

Young shares the same concerns about ERISA preemption and the ACA.

“The states are not supposed to tax benefit plans, only the feds are supposed to so that large employers can have the same plan across all their states. It's a great principle; we support it wholeheartedly,” Young said.

“What's happening with these state taxes and assessments is they're starting to nibble away at the issue of preemption and the reason is that they need the money and they're looking for if not deep pockets then some kind of pocket to raise money from,” Young said.


To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Sue Doyle at

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