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[4830-01-p] DEPARTMENT OF THE TREASURY …

[4830-01-p] DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 54 and 301 [REG-138006-12] RIN 1545-BL33 Shared Responsibility for Employers Regarding Health Coverage AGENCY: Internal Revenue Service (IRS), TREASURY . ACTION: Notice of proposed rulemaking and notice of public hearing. SUMMARY: This document contains proposed regulations providing guidance under section 4980H of the Internal Revenue Code (Code) with respect to the shared responsibility for employers regarding employee health coverage. These proposed regulations would affect only employers that meet the definition of applicable large employer as described in these proposed regulations.

3 Section 4980H generally provides that an applicable large employer is subject to an assessable payment if either (1) the employer fails to offer to its full-time employees

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Transcription of [4830-01-p] DEPARTMENT OF THE TREASURY …

1 [4830-01-p] DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 54 and 301 [REG-138006-12] RIN 1545-BL33 Shared Responsibility for Employers Regarding Health Coverage AGENCY: Internal Revenue Service (IRS), TREASURY . ACTION: Notice of proposed rulemaking and notice of public hearing. SUMMARY: This document contains proposed regulations providing guidance under section 4980H of the Internal Revenue Code (Code) with respect to the shared responsibility for employers regarding employee health coverage. These proposed regulations would affect only employers that meet the definition of applicable large employer as described in these proposed regulations.

2 As discussed in section X of this preamble, employers may rely on these proposed regulations for guidance pending the issuance of final regulations or other applicable guidance. This document also provides notice of a public hearing on these proposed regulations. DATES: Written or electronic comments must be received by March 18, 2013. Outlines of topics to be discussed at the public hearing scheduled for April 23, 2013, at 10:00 am, must be received by April 3, 2013. ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-138006-12), Internal Revenue Service, room 5203, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 2 and 4 to CC:PA:LPD:PR (REG-138006-12), Courier s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW.

3 , Washington, DC. Alternatively, taxpayers may submit comments electronically via the Federal eRulemaking Portal at (IRS REG-138006-12). The public hearing will be held in the Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC. FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, call Kathryn Bjornstad at (202) 927-9639; concerning submissions of comments, the hearing, and/or to be placed on the building access list to attend the hearing, call Oluwafunmilayo Taylor at (202) 622-7180 (not toll-free numbers). SUPPLEMENTARY INFORMATION: Background This document contains proposed Pension Excise Tax Regulations (26 CFR part 54) under section 4980H of the Code.

4 Section 4980H was added to the Code by section 1513 of the Patient Protection and Affordable Care Act, enacted March 23, 2010, Public Law No. 111-148, and amended by section 1003 of the Health Care and Education Reconciliation Act of 2010, enacted March 30, 2010, Public Law No. 111-152, and further amended by the DEPARTMENT of Defense and Full-Year Continuing Appropriations Act, 2011, Public Law 112-10 (125 Stat. 38, (2011)), (collectively, the Affordable Care Act). Section 4980H is effective for months beginning after December 31, 2013. I. Section 4980H In General 3 Section 4980H generally provides that an applicable large employer is subject to an assessable payment if either (1) the employer fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage1 (MEC) under an eligible employer-sponsored plan and any full-time employee is certified to the employer as having received an applicable premium tax credit or cost-sharing reduction (section 4980H(a) liability), or (2) the employer offers its full-time employees (and their dependents)

5 The opportunity to enroll in MEC under an eligible employer-sponsored plan and one or more full-time employees is certified to the employer as having received an applicable premium tax credit or cost-sharing reduction (section 4980H(b) liability). Generally, section 4980H(b) liability may arise because, with respect to a full-time employee who has been certified to the employer as having received an applicable premium tax credit or cost-sharing reduction, the employer s coverage is unaffordable within the meaning of section 36B(c)(2)(C)(i) or does not provide minimum value within the meaning of section 36B(c)(2)(C)(ii).1 As noted, an employer may be liable for an assessable payment under section 4980H(a) or (b) only if one or more full-time employees are certified to the employer as having received an applicable premium tax credit or cost-sharing reduction.

6 The assessable payment under section 4980H(a) is based on all (excluding the first 30) full-time employees, while the assessable payment under section 4980H(b) is based on the number of full-time employees who are certified to the employer as having received an applicable premium tax credit or cost-sharing reduction with respect to that 1 See section III of the Background section of the preamble for a discussion of MEC, minimum value and affordability. 4 employee s purchase of health insurance for himself or herself on an Exchange. In contrast, an employee s receipt of a premium tax credit or cost sharing reduction with respect to coverage for a dependent will not result in liability for the employer under section 4980H.

7 Under section 4980H(b), liability is contingent on whether the employer offers minimum essential coverage under an eligible employer-sponsored plan, and whether that coverage is affordable and provides minimum value, as determined by reference to the cost and characteristics of employee-only coverage offered to the employee. Section 4980H(c)(4) provides that a full-time employee with respect to any month is an employee who is employed on average at least 30 hours of service per week. An applicable large employer with respect to a calendar year is defined in section 4980H(c)(2) as an employer that employed an average of at least 50 full-time employees on business days during the preceding calendar year.

8 For purposes of determining whether an employer is an applicable large employer, full-time equivalent employees (FTEs), which are statutorily determined based on the hours of service of employees who are not full-time employees, are taken into account. II. Previous Guidance The TREASURY DEPARTMENT and the IRS have published four notices addressing issues under section 4980H. Each notice, briefly summarized in this section of the preamble, outlined potential approaches to future guidance, and each requested public comments. See Notice 2011-36 (2011-21 IRB 792), Notice 2011-73 (2011-40 IRB 474), Notice 2012-17 (2012-9 IRB 430), and Notice 2012-58 (2012-41 IRB 436).

9 Notice 2012-58 also provided guidance that taxpayers may rely upon for periods specified in 5 the notice. Extensive public comments were submitted in response to each of the four notices. See (d)(2). A. Notice 2011-36 Notice 2011-36 addressed the definitions of employer, employee, and hours of service. The notice also specifically described and requested comments on a possible approach that would permit employers to use an optional look-back/stability period safe harbor to determine whether ongoing employees (that is, employees other than new employees) are full-time employees for purposes of determining and calculating assessable payments under section 4980H.

10 (In the proposed regulations and the remainder of this preamble, this optional safe harbor method generally is referred to, for convenience, as the look-back measurement method. ) This method may not be used for purposes of determining status as an applicable large employer, which is prescribed by the statute. Under this method, an employer would determine each ongoing employee s status as a full-time employee by looking back at a defined period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer (the measurement period), to determine whether during that measurement period the employee was employed on average at least 30 hours of service per week.


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