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If You Blinked You Might Have Missed Important Affordable Care Act Guidance

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Notice 2015-87 issued by the IRS on December 16, 2015, provides guidance on numerous Affordable Care Act provisions.  Below are some of the highlights.

  • The Notice provides additional guidance on integrating health reimbursement arrangements (“HRAs”) with major medical plans, as originally explained in IRS Notice 2013-54.  See Q&As 1-4.
  • It provides further guidance on arrangements under which an employer reimburses an employee for some or all of the premiums for an individual insurance premium.  See Q&As 5-6.
  • Part III of the Notice clarifies certain aspects of the employer shared responsibility provisions of Code Section 4980H, including identification of employee contributions when employers offer HRAs, flex credits, opt-out payments, or fringe benefit payments required under the McNamara-O’Hara Service Contract Act.
  • Q&A 13 of the Notice explains how the $2,000 and $3,000 penalties under Code Section 4980H are adjusted for 2015 and 2016.
  • Q&A 12 explains the application of the 9.5% affordability threshold to the safe harbors under Code Section 4980H.
  • Q&A 14 clarifies how hours of service are determined under Code Section 4980H.  The guidance is particularly helpful on the issue of how to count hours while an employee is receiving STD and LTD payments.
  • Part V of the Notice clarifies application of the COBRA continuation rules to unused amounts in a health FSA carried over and available in later years pursuant to Notice 2013-71, and conditions that may be put on use of carryover amounts.
  • Part VI reiterates that IRS is providing some relief for employers required to report coverage under Code Section 6056 for calendar year 2015.  The Notice explains that “IRS will not impose penalties under” Code Sections 6721 and 6722 on companies “that can show that they have made good faith efforts to comply with the information reporting requirements.”  The relief applies only for incorrect or incomplete information reported on the return or statement, but not to failures to timely file.

Notice 2016-17 issued by the IRS on February 5, 2016, provides guidance on the application of the Affordable Care Act to premium reduction arrangements offered by colleges and universities.  The Notice gives additional guidance on how IRS Notice 2013-54 applies to premium reduction arrangements offered in connection with student health insurance plans.  It also provides colleges and universities with temporary transition relief from enforcement and penalties for such arrangements.