New Employer Shared Responsibility Penalty Guidance: Timely Employer Action Needed

March 2013

The Affordable Care Act, the federal health care reform law enacted in 2010, added a provision to the Internal Revenue Code (“Code”) (Code Section 4980H) that, beginning on January 1, 2014, may subject employers to an excise tax penalty if a covered employer fails to offer health plan coverage to a sufficient number of its employees and their dependents or if it offers coverage that is deemed unaffordable or fails to provide a certain prescribed minimum level of benefit value. This new penalty provision, formally known as the “employer shared responsibility penalty,” is often referred to as the “employer pay or play” provision. In this Alert, these new rules are referred to as the “Health Care Penalty” or “Health Care Penalties.”

The Internal Revenue Service and U.S. Treasury Department recently issued proposed regulations and related frequently asked questions concerning the Health Care Penalty (collectively, the “Proposed Regulations”). The rules are very complex and can require detailed consideration of the nature of an employer’s workforce, including the hours of service worked by employees. This Alert is intended to provide an overview of the Proposed Regulations, including some helpful transition rules, to assist employers in understanding the Health Care Penalty requirements that apply beginning in 2014.

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