IRS Transition Relief Addresses Delayed Information Reporting and Employer Mandate under the ACA | Practical Law

IRS Transition Relief Addresses Delayed Information Reporting and Employer Mandate under the ACA | Practical Law

The Internal Revenue Service (IRS) has issued transition relief addressing recently-announced delays of information reporting rules and the employer mandate under the Affordable Care Act (ACA). Under the guidance, the IRS will not impose penalties for failing to comply with the information reporting rules during 2014, and employer mandate penalties will not apply until 2015.

IRS Transition Relief Addresses Delayed Information Reporting and Employer Mandate under the ACA

by Practical Law Employee Benefits & Executive Compensation
Published on 10 Jul 2013 • USA (National/Federal)
The Internal Revenue Service (IRS) has issued transition relief addressing recently-announced delays of information reporting rules and the employer mandate under the Affordable Care Act (ACA). Under the guidance, the IRS will not impose penalties for failing to comply with the information reporting rules during 2014, and employer mandate penalties will not apply until 2015.
Last week, the Treasury Department:
On July 9, 2013, the IRS issued this formal guidance in Notice 2013-45, which provides transition relief addressing the delays of:
  • Information reporting, under Section 6055 of the Internal Revenue Code (IRC), for insurers, sponsors of self-insured plans and other providers of minimum essential coverage.
  • Information reporting, under IRC Section 6056, for large employers regarding health coverage provided to full-time employees.
  • The employer mandate, under which certain employers may be subject to penalties for:
    • failing to offer health coverage; or
    • offering coverage that is unaffordable or does not provide minimum value.
But for the delays, the information reporting rules would have applied for coverage provided during 2014, and information returns would have been due in 2015. Now, the information reporting and employer mandate provisions will not be fully effective until 2015, though employers and other reporting entities are asked to voluntarily comply with the information reporting requirements for 2014 once proposed regulations are issued this summer. According to Notice 2013-45, the proposed regulations will reflect that transition relief for the Sections 6055 and 6056 reporting rules exists for 2014.
Because Sections 6055 and 6056 reporting will be optional during 2014, the IRS will not impose penalties for failing to comply with these requirements for 2014.

Relationship Between Information Reporting and Employer Mandate

The transition relief addresses how the information reporting delays affect the ACA's employer mandate for 2014. Section 6056 information reporting is important to administering the employer mandate rules because the IRS determines whether any of an employer's full-time employees received a premium tax credit, and whether an employer mandate penalty is owed, after receiving:
As a result, the transition relief for information reporting makes it impractical to determine which employers owe an employer mandate penalty for 2014, and no employer mandate penalties will be assessed in 2014.

Effect on Premium Tax Credit and Other ACA Provisions

The transition relief does not affect employees' access to insurance exchange-related premium tax credits under the ACA. Individuals will still be eligible for a premium tax credit by enrolling in a qualified health plan under an exchange if:
  • Their household income is within a certain range.
  • They are not eligible for other minimum essential coverage, which includes employer-sponsored plans that are affordable and provide minimum value.
The transition relief also has no effect on other ACA provisions, including the requirement that individuals purchase a minimum level of health coverage or pay a penalty tax (see Practice Note, The Affordable Care Act (ACA) Overview: Individual Mandate).

Practical Impact

The delay of the information reporting requirements will provide additional time for employers and other reporting entities to develop the systems needed to collect and report required data. It may also give the IRS an opportunity to simplify the reporting requirements.