IRS Issues Proposed Reporting Rule for Large Employers under the ACA

September 16, 2013

By Neil Bomberg

On September 5, the Internal Revenue Service (IRS) issued a proposed rule outlining the types of information employers will have to provide annually to the IRS so that they can determine compliance with the employer and employee requirements of the Affordable Care Act (ACA). 

While the rule is fairly complicated and was drafted to outline the reporting requirements every employer with 50 or more employees (large employers, including cities and towns) must adhere to, it was also developed with the specific goal of reducing the paperwork burden on employers, 95 percent of whom are believed to already be in compliance with the ACA.  

The rule, if adopted, would require all employers who provide health care regardless of size, and employers with 50 or more employees who are required to provide health care, to provide a range of information designed to help the IRS determine the level of compliance and the eligibility of employees for subsidized health care coverage through the Health Insurance Marketplaces. 

Large employers, including cities and towns, will be required to provide information on individual employees including:  the amount paid by the employer and employee for health insurance, whether an employee’s dependents are covered, whether the employee is full-time (works 30 or more hours per week) or part-time, and whether the employee has received a premium tax credit.

Large employers will also have to provide information on how many employees are and are not covered by health care coverage, the essential minimum requirements that are covered, and the number of full-time workers employed per month. 

The IRS is gathering this data so that it can be sure that:

  • Employers with 50 or more employees are meeting their “shared responsibility” obligations by providing appropriate health care coverage for their full-time employees;
  • Employees who opt out of employer-sponsored health care do not receive a tax credit if they decide to purchase their insurance in the Marketplace; and
  • Employees who have employer-sponsored health care coverage are meeting their “shared responsibility” obligations under the law, but are not paying more than 9.5 percent of their total income for health care coverage.

To ease some of the reporting burdens on employers, the IRS has proposed to:

  • Eliminate the need for an employer to determine whether an employee is full- or part-time, if adequate health care coverage is provided to all employees;
  • Require that employers report the specific cost to an employee of purchasing health insurance only if the cost is above a specified dollar amount;
  • Allow self-insured plans to report all information on a single form (rather than the two forms currently required);
  • Limit substantially the reporting that is required if an employer offers no-cost coverage to employees and their families through a self-insured plan;
  • Replace the specific dates of coverage with the months of coverage; and
  • Permit governmental units such as the state to report compliance on behalf of a city or town, and grant cities and towns flexibility in how they report the benefits for different categories of workers if their health insurance coverage is different.

Click here to obtain a complete copy of the proposed rulemaking and for detailed instructions on how to comment on the rulemaking. The link also contains a range of questions that the IRS would like employers subject to this proposed rulemaking to answer.

Comments on the proposed rule are due to the IRS by November 8, 2013.  The IRS will also hold a public hearing in Washington, DC, on November 18, 2013.  Requests to appear at the hearing must be received by the IRS by November 8, 2013.