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New IRS Rules for Employer Shared Responsibility Provisions under Health Care Reform

From an employer’s perspective, one of the most important components of the Affordable Care Act (ACA) is the employer shared responsibility provisions. The Internal Revenue Service (IRS) just issued proposed regulations relating to these new rules that take effect on January 1, 2014.

The employer shared responsibility requirements apply to employers with at least 50 full-time employees or full-time employee equivalents. If such an employer does not offer affordable health coverage that provides a minimum level of coverage to its full-time employees, the employer may be subject to an excise tax. This can happen if one or more of its employees receives a premium tax credit for purchasing individual coverage on an Affordable Insurance Exchange created pursuant to the ACA.

The proposed regulations issued by the IRS provide additional guidance relating to the following issues:

  • Calculating the number of employees for purposes of the 50 full-time employee threshold.
    • Determining who is an employee.
    • Calculating hours of service.
    • Treatment of part-time employees.
    • Treatment of seasonal and variable hour employees.
  • Impact of common ownership among related employers.
  • Impact of employees working outside the United States.
  • Determining whether an employer is offering minimum essential coverage.
  • Determining whether an employer is offering affordable coverage.
  • Calculating whether the employer’s coverage provides minimum value.
  • How the employer shared responsibility excise tax payment will be made.
  • Transitional relief including effective date for health plans using a fiscal year.
  • How employees become entitled to a premium tax credit.

Although the employer shared responsibility provisions do not become law until next year, it is critical that all employers sponsoring group health plans consider the impact of these employer shared responsibility provisions on the employer’s health insurance program as soon as possible. In part, this is because 2013 will generally be used to determine if an employer meets the 50 full-time employee threshold for 2014.

IRS Circular 230 Notice

Internal Revenue Service regulations state that only a formal opinion that meets specific requirements can be used to avoid tax penalties. Any tax advice in this communication is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer, because it does not meet the requirements of a formal opinion.

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume III, Number 22



About this Author

Scott Hunt, Tax attorney, Armstrong Teasdale, law firm

A member of the firm’s Tax practice group, Scott Hunt handles matters relating to employee benefit and exempt organizations issues.

In the heavily regulated and constantly evolving field of employee benefits law, Scott monitors and analyzes all new legislation and regulations. He regularly designs stock option plans, phantom or restricted stocks, bonuses and various other types of incentive compensation plans and arrangements and advises with respect to tax, securities and corporate law issues that arise in connection with the establishment and administration of such plans.


John Igoe, Tax, Employee Benefits, Trusts, Estates, Attorney, Armstrong Teasdale

As a member of the Tax, Employee Benefits and Trusts and Estates practice group since 1986, Jon Igoe guides individuals in the creation and administration of trusts and estates and in connection with closely-held businesses. He also handles guardianships, conservatorships and employee benefits issues involving health care plans.