To make certain that 2013 will be as exciting as 2012, on January 2 the US Treasury issued proposed regulations under section 4980H of the Internal Revenue Code (“Code”), which was added to the Code by the Patient Protection and Affordable Care Act, as amended (“Act”). These regulations detail the “shared responsibility” penalties for covered employers who fail to provide their employees with adequate group health coverage in 2014 and later years. While these are not final regulations, employers may rely on them until such time as the Internal Revenue Service (“IRS”) issues final regulations or additional guidance. These regulations provide needed detail about several previously open questions concerning the obligations of covered employers, including how an employer determines whether it is subject to the Act’s group health plan mandate. While these “pay or plan” requirements do not go into effect until January 1, 2014, covered employers must make some decisions and take action in 2013 to prepare for next year. The month was capped by the release on January 24 by the Department of Labor’s (“DOL”) of Frequently Asked Questions on the Act, which heralded the delay of an employer Notice requirement that had been set for March 1, 2013.

BACKGROUND -

Section 4980H of the Code generally provides that “applicable large employers” can be assessed substantial tax penalties for failing to provide adequate group health coverage under two circumstances:

1) the employer fails to provide full-time employees and their dependents the opportunity to enroll in employer-sponsored group insurance; or 2) the cost of the health coverage offered is not affordable or the coverage does not meet a minimum value threshold. This section works hand-in hand with the part of the Act requiring individuals to obtain medical insurance either from their employer or individually (referred to as the “individual mandate”)...