Overview
ACA Penalty Relief for Small Employers Provided by the IRS
The IRS released Notice 2015-17, which provides certain transitional relief to small employers for penalties that would otherwise be due under the Affordable Care Act (the ACA).
Under Section 4980D, as enacted by the ACA, a $100 per day excise tax is imposed on employers during the period where certain group health plans sponsored by such employers fail to comply with the market reform requirements established by the ACA. These market reform requirements include limitations on exclusions for preexisting conditions and discrimination based on health status.
In 2013, the IRS released Notice 2013-54, providing guidance on, among other things, what types of plans may be subject to this Section 4980D penalty. In the 2013 notice, the IRS stated that “employer payment plans,” which are plans under which an employer either pays health insurance premiums directly to an insurance company or reimburses an employee’s substantiated premiums for non-employer sponsored hospital and medical insurance, generally are subject to the Section 4980D penalty if they do not comply with ACA market reform requirements.
Notice 2015-17, released on February 18, 2015, provides transitional relief for small employers that may be subject to a Section 4980D penalty as a result of an employer payment plan that they sponsor. The IRS notes that small employers have in the past often offered their employees health coverage through arrangements that would constitute an employer payment plan as described in the 2013 notice. However, the notice goes on to provide relief from this penalty through June 30, 2015 for certain employers that employ fewer than 50 full-time equivalent employees. The notice provides further detailed rules for determining whether a small employer will be able to qualify for this transitional relief. After June 30, 2015 , these small employers may be liable for the Section 4980D penalty if they continue to provide employer payment plans that fail to comply with ACA market reform requirements.