February 24, 2015
Authored by: Lisa Van Fleet
Employer payment plans, which include arrangements where an employer pays, or reimburses an employee, for some or all of the premium expenses incurred for an individual health insurance policy, violate market reforms under the Affordable Care Act (“ACA”).
Notice 2015-17 is the latest in a series of IRS guidance on these arrangements (see our earlier post on this topic here). While it reiterates previous conclusions regarding the failure of the arrangements to satisfy the ACA, it also provides excise-tax transition relief for certain small employers.
Limited Transitional Relief for Non-ALEs
Noncompliant group health plans may be liable for a $100/day excise tax for failure to satisfy ACA market reforms. The new Notice, while reiterating that conclusion, provides that the tax will not be asserted under two conditions:
- Until June 30, 2015, if the plan is not sponsored by an Applicable Large Employer (“ALE”). An ALE, for a given calendar year, generally had an average of 50 or more full-time employees during the preceding calendar year. If the employer was not an ALE for 2014, no tax will be asserted for 2014. If the employer is not an ALE for 2015, no tax will be asserted for the period January 1 through June 30, 2015.
- Until further guidance is issued, where there is any failure to satisfy market reforms by an S corporation 2%+ shareholder-employee healthcare arrangement. The relief does not apply to such plans covering S corporation employees who are not 2%+ shareholders.