On July 2, 2013, the Treasury Department made a surprise announcement that enforcement of the Employer Shared Responsibility Mandate, a provision of the Patient Protection and Affordable Care Act ("PPACA"), would be delayed until January 1, 2015. On July 9, the Internal Revenue Service ("IRS") issued Notice 2013-45, which provides transitional relief from the Employer Shared Responsibility Mandate penalties and related reporting requirements, and also provides a rough outline of the procedure that the IRS expects to use beginning January 1, 2015 to assess those penalties. The Notice also emphasizes that the transitional relief will have no effect on other PPACA provisions, including the individual mandate and implementation of the Health Insurance Marketplaces ("Exchanges"). This Client Advisory will provide a brief overview of Notice 2013-45, as well as an explanation of the Notice's implications for employers.

Under the Employer Shared Responsibility Mandate, an applicable large employer (i.e. an employer with at least 50 full-time equivalent employees), is required to offer affordable, minimum value health coverage to its full-time employees, or risk the imposition of the Employer Shared Responsibility penalty if one or more of its full-time employees purchases coverage through the Exchanges and receives a premium tax credit. Internal Revenue Code Sections 6055 and 6056 impose information reporting requirements on health insurers, sponsors of self-insured health plans, and employers, that the IRS will use to enforce the Employer Shared Responsibility Mandate.

In announcing the delay of the information reporting requirements, the IRS acknowledged that since employers typically will not know whether any of their employees received a premium tax credit, it would be impractical to require the employer to determine on its own whether it owes a penalty. Under PPACA, the IRS will make a determination about whether any of the employer's full-time employees received a premium tax credit, and if so, whether a penalty is owed based on information reported by employers about the coverage provided to their employees under IRC Section 6056, and information provided by individuals receiving a premium tax credit. The IRS then will contact the employer, and the employer will have an opportunity to respond to the IRS before a tax penalty is assessed. This is significant for employers, as they will not be required to calculate tax penalties, or file returns submitting tax penalties. The Treasury Department explained that the reason for the transitional relief for 2014 is to allow reporting requirements to be streamlined, and also give employers additional time to put proper reporting systems into place. However, Notice 2013-45 encourages employers to maintain or expand health coverage during the transition period, and to comply voluntarily with the IRC Section 6056 reporting requirements for 2014, for which the IRS expects to issue proposed rules later this summer.

It is not yet clear what kind of transition relief will be available for employers that wish to begin complying with the shared responsibility provisions before the new January 1, 2015 deadline. For instance, in the proposed regulations for IRC Section 4980H issued on January 1, 2013, the IRS provided a transition rule which would allow employees to make mid-year cafeteria plan elections during 2014 to comply with the individual mandate. As cafeteria plan elections must generally be made before the start of a plan year, and are irrevocable during the plan year (except upon a qualified status change), additional guidance will be necessary to determine whether this transition relief is still available.

Because Notice 2013-45 does not affect any of the other PPACA provisions, employers will still need to comply with the following list of requirements during the remainder of 2013 and 2014.

Effective in 2013:

The following list itemizes the changes that generally will become effective in 2013. The effective date depends upon a number of factors, including whether the health plan is grandfathered, the first day of the plan year, the number of employees, and the controlled group status of the employer. This list is incorporated from an earlier Client Advisory on this subject, with updates to reflect recently issued guidance. For more information about their application, effective dates and details, please see our earlier Client Advisory.

• Women's Preventive Health Care Mandates

• Reduction in the Maximum Employee Contributions to Health Flexible Spending Accounts

• Annual Benefit Limits

• Reporting the Cost of Group Health Insurance Coverage on Forms W-2

• Summary of Benefits and Coverage and Notices of Material Modification

• Additional Medicare Tax Withholding

• Taxation of the Retiree Drug Subsidy

• Patient-Centered Outcomes Research Comparative Effectiveness Fee

• Notice of Exchange (Marketplace) Availability

• Certification of Compliance to Health and Human Services (HHS)

Effective in 2014:

The following list itemizes many of the changes that generally will become effective in 2014. The effective date depends upon a number of factors, including whether the health plan is grandfathered, the first day of the plan year, and the number of employees.

• No Pre-Existing Condition Exclusions

• Clinical Trial Coverage

• New Incentive Standards for Wellness Plans

• Nondiscrimination Against Health Care Providers

• Nondiscrimination Based on Health Status

• No Annual Benefit Limits

• Coverage of Older Children

• Essential Health Benefits

• Cost Sharing Limitations

• Fair Health Insurance Premiums

• Guaranteed Availability and Guaranteed Renewability of Coverage

• 90-Day Limit on Eligibility Waiting Periods

• Transitional Reinsurance Payments