To celebrate the summer holiday season, the IRS announced earlier this month that large employers won’t be subject to the Affordable Care Act’s employer mandate penalties in 2014 after all. These rules impose penalties on large employers that don’t offer coverage to their full-time employees and dependents, or offer coverage that is not affordable or does not provide minimum value. The employer shared responsibility provisions have been delayed for another year, until 2015. The news was met with mixed reactions by employers: relief for many, frustration for those who have already taken significant steps to avoid penalties and some confusion as well.
What exactly was delayed?
Much of the confusion surrounds the rules that are delayed. Specifically, the delay applies only to the
- Employer shared responsibility provisions (Code section 4980H), and
- Certain reporting requirements applicable to large employers, insurance issuers and self-funded plans sponsors (Code sections 6055 and 6056)
It is important to keep in mind that all other ACA provisions that already have set effective dates will continue to take effect as planned. This includes the individual mandate and eligibility for Exchange subsidies.
What this means for you and your clients
With this extra breathing room, you and your clients may be tempted to ignore the pay or play rules until the new deadline starts looming again next year. However, this delay does not mean employers should put these issues so far on the back burner that they end up in the same place a year from now – before the delay was announced, many employers were uncertain of the rules, panicked about penalties and rushing to make decisions.
To some extent, taking a “wait-and-see” approach is not a bad idea. We are, once again, in the position of waiting for more guidance on the ACA’s requirements. That guidance is expected to come later this year in the form of final regulations on the pay or play rules. There were several unanswered questions in the proposed regulations that the IRS could address in the next round of rulemaking. Employers that are looking ahead to 2015 now will have to be somewhat flexible to incorporate changes or new rules into their plans.
That being said, the employer mandate rules are still set to take effect and much of the framework will most likely remain, including rules on determining employer size and measuring full-time employee status. Add to that the IRS’s tendency to issue new rules by building on top of existing guidance and you have some really good motivation for employers to educate themselves on the existing standards and determine how they will apply to their specific situations.
The benefit of the delay is that employers can use the additional time to take a more measured and purposeful approach to implementing any changes they need to make to their coverage or workforce. Employers that are more advanced in their preparations may want to take the advice of the IRS and voluntarily comply with the existing guidelines to test out their new systems. Other employers may want to avoid implementing changes because of the need to make additional adjustments for the final rules but can still assess their current situations and determine where changes might have to be made.
Your important role as the broker
Whatever approach works best for your individual clients, you can be an important part of making sure they are prepared when the rules take effect in 2015. Keep in contact about the status of the law and any new guidance – we keep Broker Briefcase updated for you with all the latest, in easy-to-read formats that employers value. Educate clients who need information on how the rules are currently written. Assist with evaluating how the current rules would apply, highlight questions they have and identify decisions they will need to make. Taking these steps will keep your clients from scrambling to comply next year, will help them be proactive, not reactive, and will help build your relationships for 2015 and beyond.