Employer Mandate Delayed

The bombshell July 2 announcement came in the form of a blog post on the U.S. Treasury Department’s website, accompanied by a statement issued from the White House. The employer “shared responsibility” provision is being delayed one year, until 2015. The move was described, essentially, as a consequence of the IRS’ failure to provide employers and health plans with guidance for their reporting obligations under Sections 6055 and 6056 of the Affordable Care Act (ACA).

Employer Mandate Delayed

From the White House

This notice was posted on the White House website on July 2, 2013:

“…In our ongoing discussions with businesses we have heard that you need the time to get this right. We are listening.

So in response to your concerns, we are making two changes. First, we are cutting red tape and simplifying the reporting process. We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination. So we plan to re-vamp and simplify the reporting process.

Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.

Second, we are giving businesses more time to comply. As we make these changes, we believe we need to give employers more time to comply with the new rules.”

Those sections cover the detailed information the IRS wants about the health plans offered to employees. Without guidance concerning what to report, the IRS would not have a way to measure whether or not employers are complying with their obligations under ACA.

Nevertheless, the government doesn’t want the delay to cause employers’ efforts to comply with the reporting requirements to grind to a complete halt until 2015. “Once these rules have been issued,” wrote Mark Mazur, the Treasury Department’s Assistant Secretary for Tax Policy, “the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.”

Mazur also promised “formal guidance describing this transition” would be issued the week of July 8. He also promised detailed rules on reporting will be issued sometime in the summer.

Finally, a statement from the White House said the government is still moving “full speed ahead” on opening the health exchanges on time.

Note: The Obama Administration also announced that it would not require the new insurance marketplaces to verify the income and health insurance status of consumers in 2014. Instead, it would rely on what consumers report themselves until 2015, when better verification systems would be in place.

Not All ACA 2013 Tasks Postponed

Some employers may wrongly conclude that all aspects of healthcare reform is postponed. Keep in mind that employers face other compliance requirements during or by the end of 2013. Examples include (if applicable):

  • Reducing waiting times for plan eligibility to no more than 90 days;
  • Complying with the rules for the Patient-Centered Outcomes Research Institute (PCORI) fee;
  • Notifying employees about the availability of state exchanges; and
  • Gearing up for more changes which take effect next year.

If any of your employees apply for coverage through a public exchange and a tax subsidy, you might be required to furnish some documentation to validate the employees’ eligibility. This is still unclear, however, and will hopefully be clarified soon.

For now, employers should sit tight until more guidance is available.

Opportunity for Course Reversal

The delay does, however, create an opportunity for employers to reconfirm whether the play-or-pay decision strategy they had mapped out for 2014 is still the best path. Chances are, nothing has changed since the original decision that would indicate the need for a new course.

This may not always be the case.

For example, suppose you decided to reduce many employees’ working hours below the 30-hour coverage threshold. Suppose also, those plans became known, and you encountered a stronger-than-expected backlash. Employees told you they would rather give up health coverage than see their hours cut. Or perhaps you have been worrying about a scenario in which you get a surge in orders and need to increase part-time employees to 30+ hours per week for a while, throwing a wrench in the works. This breather allows time to reconsider how to proceed.

For more information about your situation, consult with your employee benefits, tax, and legal professionals. ©2013