Internal Revenue Service Delays Implementation of ACA Employer Reporting and "Pay or Play" Taxes Until 2015

July 15, 2013
Legal Updates

Two Key Health Reform Components Delayed

The Treasury Department announced on July 2, 2013 that implementation of two key components of the Affordable Care Act (the "ACA" or "Health Reform") would be delayed, and followed that informal announcement with issuance of Notice 2013-45. The only provisions that will be delayed are:

Now, both of these ACA components will go into effect in 2015 rather than 2014.  Notice 2013-45 can be found here.

Other Health Reform Requirements Will Still be Effective in 2014

While this is a welcome delay for employers, the reporting and Pay or Play delay does not mean employers no longer have Health Reform compliance challenges for 2014.  Other rules were not delayed.  Here is the list of Health Reform mandates for employer plans:

Two other mandates—nondiscrimination rules and automatic enrollment for employers with over 200 employees—continue to be delayed until guidance is issued, and are not expected to be effective in 2014.

What's the Risk of Noncompliance?

Any employer that does not follow Health Reform's design mandates is potentially subject to Department of Labor audit to enforce the rules. Audits have increased lately, and the new Health Reform rules have been their primary focus.

ACA also amended the Fair Labor Standards Act to provide a private right of action to an individual who believes he was discharged or otherwise discriminated against in compensation or other terms or conditions of employment by an employer, either because he received a tax subsidy under ACA or after the individual raised questions about or reported violations of Title I the ACA (basically, the design mandates listed above).  Compensatory and special damages are allowed in these "whistleblower" actions.

Finally, private sector group health plans and church plans with more than 50 employees have a risk of large tax penalties for noncompliance.  There is an excise tax on plan sponsors of $100/day per affected individual (up to 10% of total health cost for the year, or $500,000, if less), and self-reporting on Form 8928 is required; the tax will be higher if IRS issues notice of examination before you report. For state and local governmental plans, the Department of Health and Human Services has authority to assess a similar penalty.