From the desk of Alex Renfro.
The IRS very recently released IRS Notice 2013-45. This notice does not quantify, but instead puts in formalized fashion the delay of the IRC Sec. 4980H(a) penalties, otherwise known as the employer mandates. This notice does not add much more than the IRS’ original blog post from July 2. There is no legal justification for how the federal government may enact this delay, and there is no authority that they call on other than assuming that they can enact this delay by fiat. While interesting from a Constitutional perspective, more to the point, the title of this notice is “Transition Relief for 2014,” and that is very key.
There have been other transitional relief provisions released by the IRS with regards to the Affordable Care Act for 2014. With the title of this one being “Transition Relief for 2014,” it seems to be the case that the prior transitional relief statutes and regulations are no longer in effect – they have been supplanted by this notice. That means that while there have been some employers who did not have to comply on January 1 because they were going to change their plans on their insurance renewal date, they will not be able to do that anymore. Instead, by January 1, 2015, all employers must comply.
Also, I have noticed in these regulations an assumption by the IRS: Employers will continue to plan as normal in 2014. It is a bit subtle, but what the IRS states is that the purpose of this delay is not to cease having a health plan in 2014 for newly eligible employees. The purpose is to create that health plan, but do so without worry that the plan you are creating may not have minimum essential coverage or that the plan may not be qualified and affordable. Employers have some freedom from the excise taxes, but they are still expected to be in compliance. If an employer is not in compliance, further consequences of failing to have a plan in 2014 will ensue, and the government is not going to be sympathetic to your realization of those consequences. Your delay is resulting in your consequences, by their logic.
With that said, the government is expecting employers to continue looking for health care options to offer their employees in 2014, and I think that is very important to note as their official stance. They are not expecting employers to take a year off, they are not expecting them to not have plans in place by 2014; the only thing they are expecting to occur is the employers find a plan in 2014, but not perform self-reporting on their non-compliance until 2015, which is very different than what a lot of employers may be thinking. The government does not intend these delays to also mean a delay in offering coverage.
Now, that is the official line in these regulations. Of course, if employers do delay in creating plans, that means more people will enroll in state exchanges, which is very good for the health of such exchanges. More people enrolled means a higher spread of risk, or a greater risk diversification, which benefits the exchanges. It is thus somewhat debatable whether the federal government actually believes people will delay in creating a plan or not, but they do stand to benefit by employers delaying. Employers do not benefit by delaying because of a number of other issues we will touch on in future blog posts. Information is also available through our webinars, brochures and proposals as to what could be the danger in delaying in 2014.