Saturday, February 22, 2014

Limited Delay In ObamaCare Employer Mandate

Let’s touch again on the latest change to ObamaCare.

You may remember than last July, the IRS postponed the “Section 4980H shared-responsibility penalty” to 2015. Its original effective date was 2014.

CLARIFICATION: The 4980H shared responsibility penalty is the $2,000/$3,000 ObamaCare penalty levied on employers. The penalties apply if (1) you do not offer health insurance or (2) the government does not consider the health insurance you do provide to be adequate.

NOTE: This is a separate penalty from that levied on you personally should you not carry insurance. The way ObamaCare is constructed (at least presently), both the employer and employee can wind up paying penalties.     
OBSERVATION: And these penalties will wind up on someone’s individual or business tax return, which is why we are talking about them in a tax blog.

On February 10, 2014 the IRS further delayed the 4980H penalty for employers having 50 to 99 full-time equivalent employees in 2014. These employers now have an additional year – until 2016 – to offer health insurance to their employees.

I am going to have to put up a chart on my office wall to keep track of all the delays and changes.

Let’s recap the “new” revised rules for employer compliance with the 4980H penalty:

(1)  Employers with less than 50 full-time equivalent employees do not have to pay the penalty or file additional reports with the IRS - ever.
a.     There has been no change for this employer tier.
(2)  Employers with 50 to 99 full-time equivalent employees (FTEs) will have to file reports with the IRS in 2015 but will not have to pay any penalties until 2016.
a.     That is a change.
b.    But … see below.
(3)  Employers with over 100 FTEs have to provide health insurance. They will also have to file reports and possibly pay penalties in 2015.
a.     But the hurdle for the penalties has changed.
b.    The new hurdle is 70% employee coverage for 2015 and 95% coverage in 2016 and later years.
                                                              i.     There is a small break here.

Then there is something odd.

Let’s go back to Tier 2 employers - those with 50 to 99 FTEs.

If this is you, you will have to sign an affidavit that you did not reduce the size of your workforce below 100 to take advantage of the additional one-year delay. The IRS does allow you to explain yourself, though, if you did:

For example, reductions of workforce size or overall hours of service because of business activity such as the sale of a division, changes in the economic marketplace in which the employer operates, terminations of employment for poor performance, or other similar changes unrelated to eligibility for the transition relief provided in this section XV.D.6 are for bona fide business reasons and will not affect eligibility for that transition relief.”

Tier 2 employers will be required to maintain a “comparable” level of health benefits as existed on February 9, 2014 in order to obtain relief.
OBSERVATION: Interestingly, if the Tier 2 employer did not offer health insurance on February 9, 2014, then this requirement is automatically met.

So … you will have to sign a form saying it was not the president’s fault that people lost their jobs.

I suppose it will be the tooth fairy’s fault.

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