IRS Proposes Rules on Employer Shared Responsibility for Health Insurance
January 25, 2013
Beginning in 2014, the Patient Protection and Affordable Care Act (ACA) requires employers with 50 or more full-time employees to offer group health insurance coverage to their full-time employees or pay a fine. This mandate, referred to as "employer shared responsibility" or "pay-or-play" requirements, is set out in new Internal Revenue Code §4980H. For colleges and universities, these requirements have raised issues related to the treatment of adjunct faculty.
On January 2, the Internal Revenue Service issued a notice of proposed rulemaking (NPRM) on the ACA requirements for employers under section 4980H. A related question and answers document was also released. The proposed rule provides guidance on:
- determining when an employer is covered by the ACA's mandate to provide health care coverage;
- how to identify full-time employees who are entitled to employer-provided coverage;
- how to determine whether employer-sponsored coverage meets the law's affordability requirements; and
- how the ACA's penalties will be administered.
The proposed rules also include relief for certain employers with non-calendar year plans. Those employers will not be subject to penalties for failing to meet the January 1, 2014, deadline if they satisfy the affordability and minimum coverage requirements on the first day of their 2014 plan year.
Adjunct Faculty Issues
NACUBO and several other higher education associations are participating in an effort led by the College and University Professional Association for Human Resources (CUPA-HR) to obtain clear guidance on the treatment of adjunct faculty. The group reached out to the Treasury Department and IRS last fall to highlight concerns that existing methods for determining when an employee is full time under the ACA do not work for adjunct faculty, as adjuncts are paid for services rendered rather than by the hour. Those concerns were acknowledged in the NPRM (p. 225); however, the proposed rules do not specifically address adjuncts.
According to the proposed rules, until further guidance is published, employers with such employees "must use a reasonable method for crediting hours of service that is consistent with the purposes of section 4980H." Although there is little guidance as to what is reasonable, the NPRM notes that it would be unreasonable to only take into account classroom or other instruction time and exclude other hours of work related to the performance of duties, such as class preparation time. Comments are specifically requested on how best to determine the full-time status of employees in these circumstances.
NACUBO will continue working with colleagues at CUPA-HR, the American Association of Community Colleges, the American Council on Education, the Association of American Universities, and the Association of Public and Land-grant Universities to secure guidance on this issue and will work to support CUPA-HR's efforts in developing the community comments to the NPRM, which are due March 18.
Other Key Provisions
It is worth noting that there are several provisions that adopt a common sense approach for employers, including:
- For purposes of determining whether an employer makes an offer of group health plan coverage, at least 95 percent (rather than 100 percent) of an employer's full-time employees must be offered coverage.
- The safe harbors for establishing full-time employee status are clarified and expanded upon.
- While employers must offer dependent coverage in order to be deemed to make an offer of coverage, coverage need not be offered to spouses.
Comments must be submitted by March 18.
IRS Q&A on the Basics of the Employer Shared Responsibility Provisions.
Director, Tax Policy
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