Practice Area
briefings

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Although enacted nearly six years ago, employers and their legal and finance departments are beginning to experience the impact of the Affordable Care Act1 (“ACA”) as 2015 comes to a close and, for the first time, the associated reporting obligations loom in the near future.

Enacted in March of 2010, the
ACA made significant changes to
the healthcare system of the United
States. One significant aspect of the
ACA are the provisions under sec-
tion 4980H of the Internal Revenue
Code imposing an assessable pay-
ment or penalty, referred to as the
“Employer Shared Responsibility”
payment on large employers who fail
to offer health coverage to their full-
time employees. By including this
assessable payment as a feature of the
legislation, lawmakers hoped that
most employers will find the expense
of employee coverage more cost ef-
fective than payment of the penalty,
thereby incentivizing them to offer
sufficient coverage to their employ-
ees. The employer mandate and the
associated penalties became effective
for calendar year plans beginning
on January 1, 2015, and related
reporting to the US government and
individuals for the 2015 calendar
year will be due in early 2016.2
Many employers, through their
legal, finance and human resource
functions have continued to invest
significant time and effort into
ensuring that their company was and
continues to be prepared to meet
its obligations under the ACA. Late
this summer, the IRS published draft
instructions for the reporting forms
under the ACA providing guidelines
for their filing. 3
Throughout the draft instruc-
tions, the IRS notes that penalties
could apply if the ACA report-
ing rules are not followed. Those
penalties, along with the significant
penalties that could apply to com-
panies that fail to meet coverage
obligations, continue to raise the
stakes for employers and their legal
and finance teams charged with en-
suring their company’s compliance
with the ACA. Despite the penalties
that may be imposed, an employer
will not be assessed a penalty for the
2015 calendar year if it makes a good
faith attempt to accurately report on
behalf of its employees.

Who has employer shared responsibility under Section 4980H?

For 2015 and thereafter, section 4980H generally provides that an employer with at least 50 full-time employees or a combination of full-time and part-time employees that are equivalent to 50 full-time employees is considered an “applicable large employer” and will be subject to an assessable payment if it fails to offer minimum essential coverage its full-time employees and their dependents. 4 Determining who an