Delay in Affordable Care Act

The bombshell July 2 announcement came in the form of a blog post on the U.S. Treasury Department’s website, accompanied by a statement issued from the White House. The employer “shared responsibility” provision is being delayed one year, until 2015. The move was described, essentially, as a consequence of the IRS’ failure to provide employers and health plans with guidance for their reporting obligations under Section 6055 and 6065 of the Affordable Care Act (ACA).

Those sections cover the detailed information the IRS wants about the health plans offered to employees. Without guidance concerning what to report, the IRS would not have a way to measure whether or not employers are complying with their obligations under ACA.

Nevertheless, the government doesn’t want the delay to cause employers’ efforts to comply with the reporting requirements to grind to a complete halt until 2015.

Mark Mazur, the Treasury Department’s Assistant Secretary for Tax Policy, wrote:

“Once these rules have been issued, the Administration will work with employers, insurers, and other reporting entities to strongly encourage them to voluntarily implement this information reporting in 2014, in preparation for the full application of the provisions in 2015. Real-world testing of reporting systems in 2014 will contribute to a smoother transition to full implementation in 2015.”

Mazur also promised “formal guidance describing this transition” would be issued the week of July 8. He also promised detailed rules on reporting will be issued sometime this summer.

Finally, a statement from the White House said the government is still moving “full speed ahead” on opening the health exchanges on time.

The Obama Administration also announced that it would not require the new insurance marketplaces to verify the income and health insurance status of consumers in 2014. Instead, it would rely on what consumers report themselves until 2015, when better verification systems would be in place.

Not All ACA 2013 Tasks Postponed

Some employers may wrongly conclude that all aspects of healthcare reform is postponed. Keep in mind that employers face other compliance requirements during or by the end of 2013. Examples include (if applicable):

  • Reducing waiting times for plan eligibility to no more than 90 days;
  • Complying with the rules for the Patient-Certified Outcomes Research Institute (PCORI) fee;
  • Notifying employees about the availability of state exchanges; and
  • Gearing up for more changes which will take effect next year.

If any of your employees apply for coverage through a public exchange and a tax subsidy, you might be required to furnish some documentation to validate the employees’ eligibility. This is still unclear, however, and will hopefully be clarified soon. For now, employers should sit tight until more guidance is available.

Opportunity for Course Reversal

The delay does, however, create an opportunity for employers to reconfirm whether the play-or-pay decision strategy they had mapped out for 2014 is still the best path. Chances are, nothing has changed since the original decision that would indicate the need for a new course.

This may not always be the case.

For example, suppose you decide to reduce many employees’ working hours below the 30-hour coverage threshold. Suppose also, those plans became known, and you encountered a stronger-than-expected backlash. Employees told you they would rather give up health coverage than see their hours cut. Or perhaps you have been worrying about a scenario in which you get a surge in orders and need to increase part-time employees to 30+ hours per week for a while, throwing a wrench in the works. This breather allows time to reconsider how to proceed.

For more information about your situation, consult with your tax and employee benefits advisor at D’Arcangelo & Co., LLP.