IRS Issues Proposed Regulations on Employer Shared Responsibility Mandate

Author: Tracy Morley, XpertHR Legal Editor

On December 28, 2012, the Internal Revenue Service (IRS) issued proposed regulations providing guidance on the employer shared responsibility provisions under the Affordable Care Act (ACA). Additionally, a new set of questions and answers regarding the shared responsibility requirements has been posted on the IRS website.

Beginning in 2014, employers with at least 50 full-time employees, including full-time equivalent employees, are required to offer affordable health coverage that provides a minimum level of coverage to full-time employees and their dependents. Employers that do not offer affordable, minimum level coverage may be subject to a shared responsibility penalty if at least one full-time employee receives a premium tax credit or cost sharing assistance to purchase individual coverage through a health care exchange. In general, the penalties are as follows:

  • For employers that do not offer health coverage to full-time employees (and their dependents), the penalty is $2,000 for each full-time employee in excess of 30 employees.
  • For employers that offer coverage that is unaffordable or does not provide a minimum value, the penalty is $3,000 for each full-time employee receiving a premium tax credit.

The proposed regulations build on a number of provisions from previously released guidance on the shared responsibility requirements and provide clarification on a number of other issues, which include:

  • Requiring that an employer offer coverage to substantially all (at least 95 percent) of its full-time employees (and their dependents) in order to avoid paying the shared responsibility penalty. For purposes of the shared responsibility requirements, a dependent is defined as an employee's child up to age 26. There is no requirement for an employer to offer coverage to an employee's spouse.
  • A transition period that provides that employers that do not offer dependent coverage will not be subject to the shared responsibility penalty provided they take steps during the 2014 plan year to satisfy this requirement.
  • Employers in a controlled group are aggregated for the purpose of determining whether an employer is subject to the shared responsibility requirements. However, each member of the controlled group is considered a separate entity for the purpose of calculating and applying the shared responsibility penalty.
  • Allowing employers to use one of three safe harbors to determine whether the coverage they offer is considered affordable.

Comments must be received by March 18, 2013. Additionally, the IRS plans to hold a public hearing on April 23, 2013, at 10:00 a.m. Suggested topics to be discussed at this hearing should be submitted by April 3, 2013.