SW Benefits Update - Health Care Reform’s Employer Shared Responsibility Penalties: A Checklist for Employers


by Nancy K. Campbell

Welcome to the SW Benefits Update, formerly the Employee Benefits Update.

Historically, employers have had complete discretion in deciding whether to offer group health plan coverage to their employees. If they offered coverage, they had to comply with the requirements of the Employee Retirement Income Security Act (“ERISA”), the Internal Revenue Code (the “Code”), and other applicable laws. However, if they did not offer coverage, they were not subject to penalties. It was simply a business decision whether to offer coverage. Starting in 2015, this will change—employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the employer shared responsibility provisions under Section 4980H of the Code, sometimes referred to as the “large employer play or pay penalties.”

In July 2013, IRS announced that the penalties would not take effect until 2015. The one-year delay was welcome news, but it unfortunately resulted in many employers pushing this issue to the back burner. With the IRS just having published final regulations on February 12, 2014, now is a great time to refocus on this issue.

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