Vernoia, Enterline + Brewer, CPA LLC

The Patient Protection and Affordable Care Act (PPACA) introduced many new requirements for individuals and employers. One of the new requirements is an employer shared responsibility assessable payment.  At this time, there is little guidance for employers other than the language of the PPACA and some requests for comments from government agencies. The IRS, the U.S. Department of Labor (DOL) and the Department of Health and Human Services (HHS) are developing guidance for employers.

Shared responsibility payment

The PPACA imposes a shared responsibility assessable payment on certain large employers (Code Sec. 4980H). The provisions about shared responsibility for large employers are among the most complex in the PPACA.

Generally, a large employer will be subject to an assessable payment if any full-time employee is certified to receive a premium assistance tax credit and either the employer does not offer full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an employer plan (Code Sec. 4980H(a)) or the employer offers full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage that either is unaffordable or does not provide minimum value (Code Sec. 4980H(b)).   The shared responsibility payment requirement is scheduled to be effective after 2013.

The PPACA describes how to calculate the shared responsibility payment.  The annual assessable payment under Code Sec. 4980H(a) is based on all (excluding the first 30) full-time employees. The annual assessable payment under Code Sec. 4980H(b) is based on the number of full-time employees who are certified to receive an advance payment of an applicable premium tax credit.

The shared responsibility payment requirement applies to “large” employers.  The PPACA describes a large employer as generally an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year.  The PPACA includes special rules for employers that employ seasonal workers.  The PPACA exempts small firms that have fewer than 50 full-time employees.

More guidance expected

In 2011, the IRS, DOL and HHS alerted employers that the agencies would be developing rules and regulations to implement the PPACA’s shared responsibility payment requirement.  The agencies also requested comments from employers and interested parties.

The IRS observed that the definitions of employer and employee are key in determining whether and, if so, to what extent, an employer may incur a shared responsibility payment.  The IRS indicated that it would likely define “employer” to mean the entity that is the employer of an employee under the common-law test.  Generally, employee would mean a worker who is an employee under the common-law test.  An employer’s status as a large employer would be based on the sum of full-time employees and full-time equivalent employees, the IRS noted.

Keep in mind that the IRS’s observations are just that at this time. The IRS has not issued proposed regulations.  It is unclear when proposed regulations may be released. Additionally, the Supreme Court has agreed to take up the PPACA and the Court could rule that all or part of the PPACA, including the employer shared responsibility payment, is unconstitutional.

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