The Internal Revenue Service (IRS) has today (2/18/2015) issued IRS Notice 2015-17 which could help employers through a collection of mandate penalty patches associated with the Patient Protection and Affordable Care Act (PPACA), better known as ObamaCare. The patches could relieve employer tax penalties, if they have been using employer payment plans to pay for employee health benefits, at least on a temporary basis.
Under PPACA applicable large employers (ALEs) that fail to provide employees with what PPACA defines as affordable coverage with a minimum value are subject to penalties under ObamaCare. Many employers have been attempting to meet PPACA standards using employer payment plans that reimburse employees for the cost of health insurance coverage. While this mechanism technically does not comply with the ‘letter of the law’, the mechanism designed to give employees the means to pay for coverage and let workers choose their own plans through the Small Business Health Options Program (SHOP) has not been fully implemented, so some ALEs have taken the alternative approach of reimbursing employees for other plans.
Under the IRS Notice, ALEs that have used, or continue to use, employment payment plans to pay for individual health coverage or Medicare plan premiums during 2014 and the first half of 2015 will NOT be subject to the PPACA mandated penalties for those periods. Starting July 1, 2015 any ALE who continues using employment plans rather than provide SHOP plans or ordinary group coverage will be subject to the penalty tax.
In another section of the Notice (2015-17), the IRS announced they will hold off imposing PPACA provisions regarding health coverage for S-corporation 2%-shareholder-employees until such time as they have promulgated additional rules regarding payment for such coverage.