Future Guidance Will Address Additional Employer Shared Responsibility Questions, Government Officials Say

The Treasury and the Internal Revenue Service intend to issue additional guidance by early 2013 on who is subject to the Code Sec. 4980H employer shared responsibility payment, said Kevin Knopf, attorney advisor in the Treasury Office of Benefits Tax Counsel. Knopf was speaking at a session of the American Bar Association’s Health and Welfare Benefit Plans 2012 conference on October 11 in Washington, D.C.

An audience question-and-answer session following the initial presentation by Knopf and his co-speakers from the Department of Labor and the IRS revealed numerous issues left unaddressed by the most recent guidance. These included what would be the proper treatment for seasonal agricultural workers who work more than 60 hours a week while employed, whether an employer would become liable for penalties if an employee’s work hours dropped below an insurance carrier’s contractual requirements during the stability period, and when the larger $3,000 penalty would apply. The answers to some of these questions could appear in subsequent guidance, the government speakers said.

Questions about full-time status. Code Sec. 4980H requires applicable large employers to provide minimum essential coverage to their full-time employees, defined generally as those who work an average of 30 or more hours a week (applicable large employers are defined as those with 50 or more full-time employees). If such an employer does not provide minimum essential coverage, the employer becomes subject to a “penalty” imposed per uncovered employee under Code Sec. 4980H, also known as the employer shared responsibility payment. Knopf addressed several questions unanswered by Notice 2012-58. In response to a question from an attorney representing agricultural employers with seasonal employees who work more than 60 hours in a week, Knopf said their status would possibly be addressed in upcoming guidance. A second question focused on whether employees whose work hours fall below the threshold set by insurance carriers under their contracts would then cause the employer to become subject to the Code Sec. 4980H penalty. Knopf said he would think about the question.

SBCs. Russell Weinheimer, senior attorney in the health and welfare branch of the Office of Chief Counsel, IRS Tax Exempt and Government Entities Division, addressed the February 2012 guidance on summaries of benefits and coverage (SBCs), which certain insurers and plan sponsors must provide to new enrollees and existing health care plan participants. Weinheimer discussed the four-page requirement for the summaries.

“We won’t take any enforcement action against plans and issuers that are in good faith trying to comply with the templated instructions,” Weinheimer said. “If it is impossible for you to put all your information in four pages front and back, there are two things you can do: You can go over the four pages front-and-back limitation or you can skimp on the content…. I think it was the intent of everyone who was involved in the drafting process that you should go over the four pages front-and-back. You should still accurately describe everything in accordance with the instructions.”

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