Tax tip reminds employers about 2015 transition relief

The IRS has released a Tax Tip to help certain employers understand the different types of 2015 transition relief under the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (ACA). The IRS advice is intended for applicable large employers (ALE), who may choose to offer affordable minimum essential coverage that provides minimum value to full-time employees – and minimum essential coverage to full-time employees’ dependents – or, alternatively, to potentially owe an employer shared responsibility payment to the IRS.

Plans subject to payment. ALEs with fewer than 100 full-time employees, including full-time equivalent employees, won’t be assessed an employer shared responsibility payment for 2015, provided that certain conditions are met regarding the employer’s maintenance of workforce and pre-existing health coverage. ALEs that are eligible for this relief must provide a certification of eligibility as part of the related information reporting that is required of all ALEs for 2015.

In general, if an ALE does not offer minimum essential coverage to at least 95 percent of its full-time employees and their dependents, it may owe an employer shared responsibility payment based on its total number of full-time employees. For 2015, 70 percent is substituted for 95 percent. However, even if an employer offers minimum essential coverage to at least 70 percent of its full-time employees and their dependents for 2015, it may still owe the separate — generally smaller in the aggregate — employer shared responsibility payment that applies for each full-time employee who receives the premium tax credit for purchasing coverage through the exchange.

Amount of payment. If an ALE is subject to the employer shared responsibility payment because it doesn’t offer minimum essential coverage to its full-time employees and their dependents, the annual payment is generally $2,000 for each full-time employee — adjusted for inflation — after excluding the first 30 full-time employees from the calculation.

For 2015, if an ALE with 100 or more full-time employees, including full-time equivalent employees, is subject to this employer shared responsibility payment, the payment will be calculated by reducing the ALE’s full-time employees by 80, rather than 30.

Non-calendar year plans. Transition relief is available for certain employers sponsoring noncalendar year plans for the months in 2015 prior to the beginning of the 2015 plan year with respect to certain employees, if the employer and plan meet various conditions.

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