The Final 4980H Regulations on Employer Mandate Under the ACA Offers Transition Relief Until 2016

By: Yuwei Ji

On February 10, 2014, the Internal Revenue Service (“IRS”) released final regulations regarding the Affordable Care Act’s (“ACA”) employer mandate requirement, in which the employer shared responsibility provisions of the ACA has been delayed.[1]

Section 4980H of the ACA provides for a penalty that may be imposed on an employer that employed at least 50 full-time employees and/or full-time equivalent employees (“FTE”) in the preceding year if that employer either does not offer coverage to its full-time employees and their dependents or offers coverage that is not affordable or does not provide minimum value; and at least one full-time employee enrolled in a qualified health plan and received a premium tax credit under § 36B or a cost-sharing reduction.[2]  A preceding regulation on January 2, 2013, once finalized, would have applied for periods after December 31, 2013, and provided transition relief for 2014, delaying compliance with the employer shared responsibility provisions which would be “fully effective for 2015”.[3]  In the aforementioned final regulation, the IRS provided transition relief that may further delay payments under § 4980H through 2015.

Under the final regulations, employers with fewer than 100 workers have an extra year to begin providing health insurance under the ACA.[4]  As a result, companies with 50 to 99 employees have until 2016 to begin compliance.  Small employers with fewer than 50 workers are exempt.[5]  To qualify for the transition relief, the employer must certify that it has not laid off employees or reduced hours in order to come under the 100-employee threshold or materially reduced its previously offered health coverage.[6]  Larger firms were also given more breathing room: employers with 100 or more workers have to offer coverage to at least 70% of the workforce for 2015, rather than 95%.[7]

The final regulations are intended to help employers affected by the ACA policies in providing quality, affordable coverage to workers.[8]  As Mark J. Mazur, Assistant Secretary for Tax Policy said in a statement, the IRS “will continue to make the compliance process simpler and easier to navigate.  Today’s final regulations phase in the standards to ensure that larger employers either offer quality, affordable coverage or make an employer responsibility payment starting in 2015 to help offset the cost to taxpayers of coverage or subsidies to their employees.”[9]

In addition to transition relief, the final rules provide guidance on tracking hours of service, identifying full-time employee status and full-time equivalents, and affordability safe harbors.[10]


[1] See John W. Boyd & Susan Whittaker Hughes, Employer Shared Responsibility Final Regulations Offer Partial Temporary Enforcement Relief, MONDAQ, http://www.mondaq.com/unitedstates/x/293504/Healthcare/Employer+Shared+Responsibility+Final+Regulations+Offer+Partial+Temporary+Enforcement+Relief (last updated: Feb. 16, 2014).

[2] See 26 U.S.C.A. § 4980H (2010)

[3] Shared Responsibility for Employers Regarding Health Coverage, 78 Fed. Reg. 219 (Jan. 2, 2013) (amended at 78 Fed. Reg. 16445 (Mar. 15, 2013)).

[4] See 79 Fed. Reg. 8544 (Fed. 12, 2014).

[5] See Id.

[6] See Id.

[7] See Id.

[8] Michael Cohn, Treasury and IRS Issue Final Employer Mandate Rules for  Obamacare, ACCOUNTINGTODAY, http://www.accountingtoday.com/news/Treasury-IRS-Issue-Final-Employer-Mandate-Rules-Obamacare-69572-1.html.

[9] Id.

[10] See 79 Fed. Reg. 8544, supra note 4.

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