IRS Notice Relating to ACA Insurance Reform Implementation Plans related to Employer Coverage
Agencies Issue FAQs on Waiting Periods,
Automatic Enrollment, Employer Payments
FAQs in IRS Notice 2012-17
Key Development: IRS and Treasury answer frequently asked questions about automatic enrollment, employer shared responsibility, and waiting periods under PPACA.
Next Steps: Public comments on the FAQs are due April 9.
The Internal Revenue Service in Notice 2012-17, issued Feb. 9, answered frequently asked questions related to automatic enrollment, employer shared responsibility payments, and waiting periods under the 2010 landmark federal health care law.
The notice, issued in substantially identical form by the departments of Treasury, Labor, and Health and Human Services, addressed employers' questions and invited comments on proposals that the departments expect to include in future guidance or rulemaking under the Patient Protection and Affordable Care Act.
Notice 2012-17 included the following information in the form of FAQs:
• Q1: Guidance on automatic enrollment will not be ready by 2014, and until a final regulation on automatic enrollment under the Fair Labor Standards Act, Section 18A, is issued and in effect, employers will not be required to comply with FLSA's Section 18A.
• Q2: IRS and Treasury intend to propose a regulation or other guidance permitting employers to use an employee's Form W-2 wages as a safe harbor for determining the affordability of employer-sponsored health insurance coverage, as described in IRS Notice 2011-73 (179 HCDR, 9/15/11).
• Q3: IRS and Treasury intend to propose a regulation or other guidance on employer shared responsibility payments under tax code Section 4980H that will clarify how the employer shared responsibility provisions will be coordinated with a 90-day waiting period limitation under Section 2708 of the Public Health Service Act. Under the anticipated guidance, an employer that sponsors a group health plan would not be liable for making an employer responsibility payment under Section 4980H if it failed to offer coverage under its plan to an employee during the first three months after the employee's hire date.
• Q4: IRS and Treasury intend to propose a regulation or other guidance that would allow employers to use a “look-back and stability period safe harbor” method, outlined in IRS Notice 2011-36 (86 HCDR, 5/4/11), for determining whether an employee, other than a newly hired employee, is a full-time employee. The anticipated guidance would permit look-back and stability periods no longer than 12 months.
• Q5: Anticipated IRS and Treasury guidance under Section 4980H would give employers, in certain circumstances, six months to determine whether a newly hired employee is a full-time employee, and would provide that during that period, the employer would not be liable for a Section 4980H penalty payment for that employee. The time that an employer would have to determine whether a newly hired employee is a full–time employee would depend on whether the employee is reasonably expected, when hired, to work an average of 30 or more hours per week on an annual basis and whether, at the end of that employee's first three months of employment, the hours worked reflect the average number of hours the employee would be expected to work on an annual basis.
• Q6: Employers would not be required to offer coverage to part-time employees or to any other category of employees when Section 2708 of the Public Health Service Act, which imposes a 90-day limitation on waiting periods, becomes effective in 2014. Separately, under PPACA, small employers will not be penalized for choosing not to offer coverage to any employee, and large employers will not be penalized for choosing to limit their offer of coverage to full-time employees, as defined in the law's employer shared responsibility provisions.
• Q7: The departments intend to retain the definition of “waiting period” in Section 2708 of the Public Health Service Act, which defines a 90-day waiting period as beginning when an employee is otherwise eligible for coverage under an employer's group health plan. Additional conditions for eligibility would generally be permissible under anticipated guidance unless the conditions were designed to avoid compliance with the 90-day waiting period limitation. Eligibility conditions such as full-time status, a bona fide job category, or receipt of a license would be permissible.
Public Comments Sought
Public comments on the FAQs received by an April 9 deadline will be reviewed and shared by the departments of Treasury, Labor, and Health and Human Services, the notice said. The e-mail address for submitting comments is email@example.com.
Notice 2012-17 is scheduled for publication Feb. 27 in Internal Revenue Bulletin 2012-9.
For More Information Full text of Notice 2012-17 is at http://op.bna.com/pen.nsf/r?Open=pkun-8rbnq8.