Department of the Treasury - GPO

1 Vol. 79 Wednesday, No. 29 February 12, 2014. Part II. Department of the Treasury Internal Revenue Service 26 CFR Parts 1, 54, and 301. Shared Responsibility for Employers Regarding health Coverage; Final Rule mstockstill on DSK4 VPTVN1 PROD with RULES2. VerDate Mar<15>2010 17:32 Feb 11, 2014 Jkt 232001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\ 12 FER2. 8544 Federal Register / Vol. 79, No. 29 / Wednesday, February 12, 2014 / Rules and Regulations Department OF THE Treasury I. Shared Responsibility for Employers time employees is certified to the (Section 4980H) employer as having received an Internal Revenue Service applicable premium tax credit or cost- A. In general sharing reduction (section 4980H(b). 26 CFR Parts 1, 54, and 301 Section 4980H was added to the Code liability). Section 4980H(c)(4) provides by section 1513 of the Patient Protection that a full-time employee with respect to [TD 9655].

2 And Affordable Care Act, Public Law any month is an employee who is RIN 1545 BL33 111 148 (124 Stat. 119 (2010)), was employed on average at least 30 hours amended by section 10106(e) and (f) of of service per week. Shared Responsibility for Employers the Patient Protection and Affordable An employer may be liable for an Regarding health Coverage Care Act, was further amended by assessable payment under section AGENCY: Internal Revenue Service (IRS), section 1003 of the health Care and 4980H(a) or (b) only if one or more full- Treasury . Education Reconciliation Act of 2010, time employees are certified to the Public Law 111 152 (124 Stat. 1029 employer as having received an ACTION: Final regulations. (2010)), and was further amended by the applicable premium tax credit or cost- SUMMARY: This document contains final Department of Defense and Full-Year sharing reduction.

3 The assessable regulations providing guidance to Continuing Appropriations Act, 2011, payment under section 4980H(a) is employers that are subject to the shared Public Law 112 10 (125 Stat. 38 (2011)) equal to the number of all full-time responsibility provisions regarding (collectively, the Affordable Care Act). employees (excluding 30 full-time employee health coverage under section Section 1513(d) of the Affordable Care employees) multiplied by one-twelfth of 4980H of the Internal Revenue Code Act provides that section 4980H applies $2,000 for each calendar month, while (Code), enacted by the Affordable Care to months beginning after December 31, the assessable payment under section Act. These regulations affect employers 2013; however, Notice 2013 45 (2013 4980H(b) is based on the number of full- referred to as applicable large employers 31 IRB 116), issued on July 9, 2013, time employees who are certified to the (generally meaning, for each year, provides transition relief for 2014 with employer as having received an employers that had 50 or more full-time respect to section 4980H.)

4 Applicable premium tax credit or cost- Section 4980H applies only to sharing reduction with respect to that employees, including full-time applicable large employers. An employee's purchase of health equivalent employees, during the prior applicable large employer with respect insurance for the employee on an year). Generally, under section 4980H. to a calendar year is defined in section Affordable Insurance Exchange an applicable large employer that, for a 4980H(c)(2) as an employer that (Exchange) 1 multiplied by one-twelfth calendar month, fails to offer to its full- employed an average of at least 50 full- of $3,000 for each calendar month. In no time employees health coverage that is time employees on business days during case, however, may the liability under affordable and provides minimum value the preceding calendar year. For section 4980H(b) exceed the maximum may be subject to an assessable payment purposes of determining whether an potential liability under section if a full-time employee enrolls for that employer is an applicable large 4980H(a).

5 Generally, liability under month in a qualified health plan for employer, full-time equivalent section 4980H(b) may arise because, which the employee receives a premium employees (FTEs), as well as full-time tax credit. with respect to a full-time employee employees, are taken into account. As who has been certified to the employer DATES: Effective date: These regulations set forth in section 4980H(c)(2)(E), the as having received an applicable are effective February 12, 2014. number of an employer's FTEs is premium tax credit or cost-sharing Applicability Dates: For dates of determined based on the hours of reduction,2 the coverage 3 offered by the applicability, see section XVI of this service of employees who are not full- employer is not affordable within the preamble, 1(b), time employees. Under section meaning of section 36B(c)(2)(C)(i) or 2(f), 3(i), 4(h), 4980H(c)(2)(C), the determination of does not provide minimum value (MV).

6 5(g), and 6(b). whether an employer that was not in within the meaning of section FOR FURTHER INFORMATION CONTACT: existence in the preceding calendar year 36B(c)(2)(C)(ii). An employee's receipt Kathryn Johnson or Shad Fagerland, is an applicable large employer is based of a premium tax credit under section (202) 317 6846 (not a toll-free number). on the average number of employees 36B (premium tax credit) with respect to SUPPLEMENTARY INFORMATION: that it is reasonably expected the coverage for a dependent only will not employer will employ on business days result in liability for the employer under Background in the current calendar year. section 4980H. Sections I through IV of the preamble Section 4980H generally provides that ( Background'') describe section 4980H, an applicable large employer is subject B. Previously issued guidance including previously issued guidance to an assessable payment if either (1) the During 2011 and 2012, the Treasury under section 4980H, as well as related employer fails to offer to its full-time Department and the IRS published four statutory provisions.

7 Sections V through employees (and their dependents) the notices, each of which outlined XIV of the preamble ( Explanation and opportunity to enroll in minimum potential approaches to future guidance Summary of Comments'') describe the essential coverage (MEC) under an comments received on the proposed eligible employer-sponsored plan and 1 An Exchange is also referred to in other regulations and explain amendments to any full-time employee is certified to published guidance as a Marketplace. 2 For simplicity, references in this preamble to the proposed regulations. Section XV of the employer as having received an mstockstill on DSK4 VPTVN1 PROD with RULES2. full-time employees certified as having received a the preamble ( Transition Relief and applicable premium tax credit or cost- premium tax credit include full-time employees Interim Guidance'') provides certain sharing reduction (section 4980H(a) receiving the premium tax credit or the cost-sharing transition relief and interim guidance liability), or (2) the employer offers its reduction because, in connection with Exchange under section 4980H, and section XVI of full-time employees (and their coverage, only individuals who qualify for the premium tax credit can qualify for a cost-sharing the preamble provides information on dependents) the opportunity to enroll in reduction.

8 The effective date for and reliance on MEC under an eligible employer- 3 For purposes of this preamble, the term these final regulations. sponsored plan and one or more full- coverage'' means MEC. VerDate Mar<15>2010 17:32 Feb 11, 2014 Jkt 232001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\ 12 FER2. Federal Register / Vol. 79, No. 29 / Wednesday, February 12, 2014 / Rules and Regulations 8545. under section 4980H and requested elections for accident and health plans MEC does not include coverage public comments: (1) Notice 2011 36 provided through section 125 cafeteria consisting solely of excepted benefits (2011 21 IRB 792) (addressed the plans for non-calendar cafeteria plan described in section 2791(c)(1), (c)(2), definition of the terms employer, years beginning in 2013. The scope of (c)(3), or (c)(4) of the PHS Act or employee, and hour of service and this transition relief was clarified in regulations issued under these requested comments on an approach to section VI of Notice 2013 71 (2013 47 provisions.))

9 See 2(g). use an optional look-back measurement IRB 532), issued on October 31, 2013. B. Minimum Value (MV). method for determining full-time II. Minimum Essential Coverage, If the coverage offered by an employer employee status); (2) Notice 2011 73. Minimum Value and Affordability fails to provide MV, an employee may (2011 40 IRB 474) (requested comments (Sections 5000A and 36B) be eligible to receive coverage in a on a health coverage affordability safe harbor for employers under section MEC, MV and affordability are qualified health plan supported by the 4980H using Form W 2 wages); (3) defined under Code provisions other premium tax credit. Under section Notice 2012 17 (2012 9 IRB 430) than section 4980H, but all relate to the 36B(c)(2)(C)(ii), a plan fails to provide (provided that the look-back determination of liability under section MV if the plan's share of the total measurement method and the Form W 4980H, and accordingly are summarized allowed costs of benefits provided 2 affordability safe harbor will be briefly in this section of the preamble under the plan is less than 60 percent incorporated into upcoming proposed (but are more fully described in other of those costs.

10 Regulations and requested comments on cited guidance). Specifically, for Section 1302(d)(2)(C) of the a potential approach for determining the purposes of section 4980H, an employer Affordable Care Act provides that, in full-time employee status of new is not treated as having offered coverage determining the percentage of the total employees under section 4980H); and to an employee unless the coverage is allowed costs of benefits provided (4) Notice 2012 58 (2012 41 IRB 436) MEC. Moreover, under section 36B, an under a group health plan, the (provided guidance and reliance on individual who is offered employer regulations promulgated by the approaches for ongoing employees and coverage but instead purchases coverage Secretary of health and Human Services new employees who are reasonably under a qualified health plan within the (HHS) under section 1302(d)(2) of the expected to be full-time employees and meaning of section 1301(a) of the Affordable Care Act apply.