PPACA’s Employer Mandates Delayed Until 2015 – Now What?

By Kristi R. Gauthier, Esq.
Clark Hill PLC
August 20, 2013

Last month the government released guidance announcing that the employer shared responsibility mandates and related penalties under the Patient Protection and Affordable Care Act (PPACA) will not be enforced until January 1, 2015 (IRS Notice 2013-45). While the collective exhale of employers could be heard across the country, it is important for employers to keep in mind that the employer mandates have not been repealed and that compliance has only been delayed by one year.

It is also important to understand that the delay applies only to the employer mandates and related penalties, as well as corresponding reporting requirements, while other provisions and requirements under PPACA are still expected to take effect in 2013 and 2014 as planned.

What Is The Reason For The Delay?
The IRS indicated that the driving force behind the delay was the PPACA information reporting requirement, which is integral to the administration of the employer shared responsibility payment provisions and related penalties.

Under PPACA, applicable large employers are required to provide information to the IRS with respect to the health care coverage offered to their full-time employees. In addition, applicable large employers are required to provide statements to full-time employees pertaining to the information provided to the IRS and required contact information. Both the IRS reports and employee statements are required by January 31st of each year. IRS Notice 2013-45 states that transitional guidance is expected to be issued sometime before the end of the summer and is expected to simplify the reporting requirements. Once the transitional guidance is issued, the IRS encourages employers to voluntarily comply with the reporting requirements for 2014. However, no penalties will be assessed against employers for failure to comply with the reporting requirements prior to 2015.

Given that the reporting requirements are integral to the employer shared responsibility provisions and the assessment of potential penalties on applicable large employers, the delay also means that no employer shared responsibility penalties will be assessed against an applicable large employer in 2014 for failure to provide “affordable” and “minimum value” coverage to at least 95% of its full-time workforce.

What Has Not Changed?
The one year delay applies only to the employer shared responsibility reporting requirements and mandate penalties. The one-year delay has no impact on the effective dates of other PPACA provisions such as:

• Provision of Marketplace (Exchange) Notices to all employees by October 1, 2013;
• Prohibition on plan waiting periods greater than 90 days beginning on or after January 1, 2014;
• Prohibition on preexisting condition limitations for any age beginning on or after January 1, 2014;
• Prohibition on annual maximums on essential health benefits beginning on or after January 1, 2014; and
• Group health plan mandates on cost-sharing (such as limits on out-of-pocket maximums and deductible maximums) for nongrandfathered health plans beginning on or after January 1, 2014.

In addition, the delay did not impact the assessment and collection of the Patient-Centered Outcomes and Research Institute (PCORI) and Transitional Reinsurance Program (TRP) fees in 2013 and beyond.

What Should Employers Be Doing?
Despite the one year delay in the reporting requirements and enforcement of the employer shared responsibility provisions, employers should remain diligent in their efforts to comply with these provisions of PPACA. Employers should take advantage of this additional time by continuing the process of identifying full-time employees, establishing applicable measurement periods and making any desired changes to its workforce. In addition, employers should continue to analyze their current health plan structure to gauge compliance with minimum value and affordability standards and begin to plan for any necessary changes needed to eliminate or minimize potential penalty amounts come 2015.

While it is possible that future guidance may change some of the rules associated with the employer shared responsibility provisions, the reality is that it is likely the rules will remain largely the same and employers should continue to work with their legal counsel and benefits consultants to forge ahead with their compliance strategy.

*This article is not intended to give legal advice. It is comprised of general information. Employers facing specific issues should seek the assistance of legal counsel.

Kristi R. Gauthier is a senior attorney in Clark Hill’s Birmingham office and concentrates her practice in Employee Benefits Law. Kristi has represented clients in a wide variety of employee benefits issues involving health and welfare benefits, as well as retirement plans. Kristi is admitted to practice in the State of Michigan, the U.S. District Court for the Eastern District of Michigan, and the U.S. Sixth Circuit Court of Appeals. She also is active in the legal community with memberships in the American Bar Association, the State Bar of Michigan, and the Oakland County Bar Association where she is a member of the Employee Benefits Committee. Kristi also serves as a member of the Clark Hill Diversity and Inclusion Committee. Kristi has lectured on various employee benefits issues, including ERISA compliance, healthcare reform, COBRA, section 125 plans, 403(b) plans and IRS plan correction programs. Kristi is also a co-author of the ABA publication ERISA Survey of Federal Circuits. Kristi was named a “Rising Star” by Michigan Super Lawyers in 2011