Play-or-Pay Penalties Delayed Until 2015

Yesterday afternoon, the U.S. Department of Treasury announced a limited one-year postponement for employers who must comply with the shared responsibility provisions (a.k.a. “play or pay”) of section 4980H of the Patient Protection and Affordable Care Act (PPACA), a.k.a. health care reform. Click here to read the annoucement. What does this mean for employers? 

Initially, it means that Applicable Large Employers—those who employ 50 or more full-time employees and equivalents—will not need to pay a 4980H penalty for non-compliance with the mandates of PPACA for 2014. It also postpones by one year some of the complex employer and insurer IRS reporting requirements, described in section 6055 and 6056 of the Internal Revenue Code. Please see MSEC’s Health Care Reform Learning Zone for more information on these reporting requirements.

What’s next? The Treasury Department intends to issue formal guidance on this narrow postponement within the next week, at which time we will learn more. Further, the IRS intends to issue more proposed rules this summer. These rules will be subject to the notice and comment period required by federal law. We encourage employers to make comments and suggestions to the IRS to help them streamline some of the onerous reporting requirements. This one-year-hiatus should result in better regulations and allow time for testing various systems and new processes to ensure proper function before fines are imposed.

As of this announcement, the shared responsibility tax penalty for Applicable Large Employers will not apply until 2015. The Treasury Department added that employees will still have access to the premium tax credits available under health care reform. MSEC will keep you informed as more information is received.