The IRS recently issued Notice 2013-42, which grants transition relief from the individual shared responsibility penalty for persons whose employers offer group health coverage on a non-calendar year basis. Specifically, individuals who are eligible under an employer’s non-calendar year plan with a plan year beginning in 2013 and ending in 2014 will not be liable for the individual shared responsibility for the period from January 1, 2014, through the month in which the employer’s 2013-2014 plan year ends. This frees these individuals from the duty to enroll in the plan in 2013, simply in order to have secured minimum essential coverage as of January 1, 2014. Examples set forth in the notice suggest that an employee whose plan is on a non-calendar year cycle can wait to enroll in the 2014-2015 plan year, even when the employee’s spouse is eligible for coverage under a calendar year plan.
Secondly, June 30, 2013 came and went without the Treasury Department publishing proposed regulations on nondiscrimination rules for insured health plans. The ACA imposes these rules but the Treasury Department has suspended enforcement of them, pending issuance of regulatory guidance. As tax regulations generally cannot go into effect earlier than 6 months after publication, they needed to have been published by June 30 in order to take effect January 1, 2014. It now appears possible if not likely that the nondiscrimination rules will not take effect until 2015, to allow employers who must commit to insurance policies on a 12-month cycle adequate time in 2014 both to understand the new regulations and to make plan design changes as needed. in order to comply with them.
Both of these developments transpired before the Treasury Department announced that it would not enforce until 2015 employer shared responsibility tax penalties, or tax reporting duties related to the employer and individual mandates, originally required in 2014. It is likely that the individual mandate will go into effect on January 1, 2014 as scheduled. What is not clear at this point is whether nondiscrimination rules will go into effect concurrently with the delayed employer mandate penalties, in 2015, or will be delayed an additional year, to 2016. Given the Treasury’s expressed goal, in its memo, of implementing the ACA in a “careful, thoughtful manner,” it is possible that more time for compliance will be provided.