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Update: Play or Pay Under the Affordable Care Act

By June 25, 2014 February 19th, 2015 No Comments

The Internal Revenue Service (IRS) released its final regulations implementing the Affordable Care Act’s (ACA) employer shared-responsibility mandate, also known as the “play-or-pay provision,” and recently announced new reporting requirements under the IRS tax codes. Under the ACA, only large employers are subject to the play-or-pay provision.

What is Employer Shared Responsibility?

Under the Employer Shared Responsibility provision, large employers that do not offer affordable health coverage which provides a ACA health care reformminimum level of coverage to their full-time employees (and their dependents) will be penalized. The employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on the Health Insurance Marketplace. According to the IRS website, large and small employers are defined as follows:

  • Large employers are defined as having 50 full-time employees or a combination of full-time and part-time employees that’s equivalent to at least 50 full-time employees. A full-time employee generally is someone employed on average at least 30 hours a week, or 130 hours in a calendar month.
  • Employers that employ fewer than 50 full-time employees (including full-time equivalents) in their businesses are not subject to the Employer Shared Responsibility provisions. The vast majority of businesses fall below this threshold.

The Employer Shared Responsibility provisions generally are not effective until Jan. 1, 2015, meaning that no Employer Shared Responsibility payments will be assessed for 2014.

Several new reporting requirements under the IRS tax codes

Section 6056 requires employers to report information to the IRS about their compliance with the employer shared responsibility provisions, including the type of health care coverage offered to employees.

Reporting includes:

  • Information about the employer offering coverage (including contact information and the number of full-time employees).
  • For each full-time employee, information about the coverage (if any) offered to the employee by month, including the lowest employee cost of self-only coverage offered.

The regulations provide for each applicable large employer to file a Section 6056 return with respect to its full-time employees. The IRS Form 1095-C (employee statement) and a Form 1094-C (transmittal) are the proposed designated forms to be used for Section 6056 reporting. Because the reporting does not take effect until 2015, these IRS forms are not yet available.

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