IRS Addresses ACA Rules for Employer Provided Health Coverage

On Dec. 16, 2015, the Internal Revenue Service (IRS) issued Notice 2015-87 to address how certain provisions under the Affordable Care Act (ACA) apply to employer-provided health coverage.

The notice covers the ACA’s market reforms as well as the employer shared responsibility rules and related reporting requirements.

Key provisions of the notice include:

  • Confirmation of adjusted employer shared responsibility penalty amounts. For 2015, the adjusted penalty amounts are $2,080 and $3,120. For 2016, the adjusted penalty amounts are $2,160 and $3,240. The IRS anticipates that adjustments for future years will be posted on the IRS.gov website.
  • Application of the adjusted affordability percentage to the affordability safe harbors under the employer shared responsibility rules. The adjusted amounts are 9.56 percent for 2015 and 9.66 percent for 2016.
  • Clarification on how the employee contribution for coverage is calculated. The IRS has provided information on how the cost is affected by HRA and flex contributions, opt-out payments and Service Contract Act/Davis-Bacon Act fringe benefits.

The guidance provided in Notice 2015-87 generally applies for plan years beginning on or after Dec. 16, 2015. However, taxpayers may apply this guidance for all prior periods, and transition relief is available for some rules.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.