Issue 48: How Will the Employer Penalty in 2014 Work? Employer Shared Responsibility Proposed Regulations Issued

This is the forty-eighth issue in our series of alerts for employers on selected topics in health care reform.  (Click here to access our general summary of health care reform and other issues in this series.)  This series of Health Care Reform Management Alerts is designed to provide an in-depth analysis of certain aspects of health care reform and how it will impact your employer-sponsored plans.

Following several notices regarding potential approaches for the employer mandate provisions of the Patient Protection and Affordable Care Act (PPACA) and requests for comments, the IRS issued proposed regulations on how the employer mandate will work, which were published in the Federal Register this week.  These proposed regulations largely confirm the IRS’s previously proposed approaches for determining whether an employer is subject to the employer mandate and how to determine which employees are considered “full-time employees.” But the proposed regulations do include a few changes, provide more detailed guidance, and include new guidance on the logistics of how the employer penalty would be calculated and paid. 

Employers may rely on these proposed regulations pending issuance of final regulations.  The IRS will take comments on these proposed regulations through March 18, 2013 and will hold a public hearing on these proposed regulations on April 23, 2013.  The IRS has also issued Questions and Answers on the employer shared responsibility rules which provide an overview of some of the provisions in the proposed regulations.

This alert is broken into four parts.  Part I briefly summarizes the proposed regulations’ significant changes and modifications from previous guidance.  Part II provides a more comprehensive overview of how employers determine whether they are subject to the mandate.  Part III provides a more details how employers determine who is a “full-time employee” for purposes of the penalty.  Finally, Part IV describes how the penalty is calculated.

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