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By Sean Forbes
Feb. 11 --The Treasury Department's delay of the employer shared-responsibility provisions for some employers under the Affordable Care Act was welcomed by practitioners who said the final rules provide much-needed relief, although they warned that there will be some “growing pains” for employers, individuals and the government as the new reporting process is brought into play.
The transitional relief rules (T.D. 9655), issued Feb. 10 and set to take effect Jan. 1, 2015, provide an additional year for employers with 50 to 99 full-time workers to comply with employer shared-responsibility provisions under tax code Section 4980H.
“The one overriding significant point here is that to a large extent, this guidance offers some additional transitional relief to ease employers into full compliance by 2016, as opposed to 2015,” Paul Hamburger, a partner in the Washington office of Proskauer Rose LLP and a member of the firm's Health Care Reform Task Force, told Bloomberg BNA Feb. 10.
The rules do apply for 2015, “but there are transition rules that will make things a little bit easier for 2015 into 2016,” he said.
The employer shared-responsibility rules--otherwise known as the employer mandate--generally provide that applicable large employers with more than 50 full-time employees and/or full-time equivalents may face penalties if they don't offer full-time employees and their dependents affordable health-care coverage that meets minimum-value standards and if at least one of their employees receives a premium tax credit or reduced-cost health insurance through one of the ACA health insurance marketplaces.
However, under the transitional relief provided in the final rules, in 2015, only employers with 100 or more full-time employees and/or full-time equivalents must comply with the requirements. A crucial condition for receiving the transitional relief is that employers must certify that they haven't laid off employees to drop under the 100-employee threshold. They also must certify that they won't drop health plans they already offer. The final rules apply to about 4 percent of employers in the U.S.
President Barack Obama in a White House news conference Feb. 11 defended the relief provisions in the final rules, saying they don't undermine the ACA.
The final rules made “reasonable accommodations based on real-life implementation,” Karen Linscott, chief operating officer of the National Business Coalition on Health, said Feb. 11.
The delay also is a challenge because of the “shifting sands,” Linscott said, where “you think you're going one direction, but then the rules change midway. But that's the nature of making accommodations. The good of the accommodation outweighs the uncertainty.”
Linscott said she thought coalition members saw this additional transition period as some “reasonable accommodations” for employers that needed more time.
But the delay might cause confusion for some small-business owners, Amanda Austin, director of federal policy for the National Federation of Independent Business, said Feb. 11.
Small employers “tend to go back into their shell” when legal and market changes happen on a consistent basis, Austin said.
“When there's uncertainty in the marketplace, and you don't know what the future holds, you tend to hold back on making big business decisions--that's just the nature of the beast,” Austin said.
Austin added that the delay does have an upside for some small employers.
“I think it's always helpful that there is a delay to something that's going to be a new business expense or new business compliance,” she said. “I don't think we should deny the fact that, yes, that is some relief, that [Treasury] initially delayed the entirety of the mandate, and then a portion of it until to 2016. That is going to help some people.”
The delay also is useful for noncalendar-year plans, according to Peter Marathas, a partner in Proskauer's Boston office and member of the firm's Health Care Reform Task Force.
“Businesses offering health plans that operate on a non-calendar year basis were told by the IRS that they may not have to start reporting at the June 2014 start date,” he said in a Feb. 11 e-mail to Bloomberg BNA. “When enforcement was initially pushed back, it became unclear whether the IRS would push back this relief. Monday's announcement made it clear that these businesses will not have to make the changes until June 2015, which is excellent news for employers as it gives them more time to prepare.”
The Internal Revenue Service published proposed rules (REG-138006-12) in January 2013 that would have allowed noncalendar-year health plan employers to have until the 2014 start date of their plan year for bringing their plans into compliance with the shared-responsibility rules.
Marathas said despite the delays in the ACA's requirements, employers must keep in mind that the law is here to stay.
“The health law has been a study in procrastination from the beginning,” he said. “Health care reform is a political minefield with a history of the President and legislature showing a total lack of willingness to compromise. This has led to a mistaken belief amongst many employers that the law will never go into effect. Businesses should be working hard to ensure that they are prepared to meet the record-keeping demands of this legislation.”
The next set of regulations to come out will be the related employer reporting requirements, which Treasury had said should be coming out shortly, Hamburger said.
This includes Section 6056 annual reporting requirements. Under IRS proposed regulations (REG-136630-12), beginning in 2015, large employers must send to the tax agency a complete listing of every full-time employee with an indication of whether each one was offered affordable health insurance coverage that meets minimum-value standards for each month of the previous year.
The employer reporting requirements also include IRS proposed regulations (REG-132455-11) under Section 6055, which 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.
“Once the employer reporting requirements are finalized along with these final regulations, there will be a system in place designed to implement the shared responsibility rules,” Hamburger said.
Greta Cowart, a shareholder in Winstead PC's Dallas office, said Feb. 11 that the reporting requirements are “key” to the implementation of the ACA's employer shared-responsibility requirements, as well as the marketplace premium assistance tax credit under tax code Section 36B.
Employers will very likely have technological challenges as they implement the reporting provisions, Cowart said.
The challenges will come from the fact that the data is typically not contained in any one software system and historically haven't been integrated by employers, Cowart said.
There will likely be some “growing pains” for employers, individuals and the government as they begin the new reporting process and learn how to integrate the data, she said.
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