March 2, 2015

ACA Penalty Relief for Small Employers

IRS gives Relief for 2014 HRA Mistakes by Small Employers and 2% S Corporation shareholder-Employees The Affordable Care Act (ACA) prohibits an employer from reimbursing an employee for some or all of the premium expenses incurred for an individual health insurance policy or directly paying a premium for an individual health insurance policy covering the employee. A violation of the reimbursement restriction can subject the business to a $100 per day, per employee penalty (the §4980D penalty). Notice 2015-17 gives transition relief from the assessment of excise tax under §4980D for failure to satisfy market reforms required by ACA. The Notice provides that: 1. The excise tax under §4980D will not be asserted for any failure to satisfy the market reforms by employer payment plans that pay or reimburse employees for individual health policy premiums or Medicare Part B or Part D premiums: (a) for 2014, for employers that are not allocable large employers (ALEs) for 2014; and (b) for January 1 through June 30, 2015, for employers that are not ALEs for 2015. After June 30, 2015, such employers may be liable for the §4980D excise tax.