Benefits & Compensation News

IRS: Obamacare doesn’t require you to offer ‘affordable’ family coverage

After a barrage of guidance, the IRS finally published its proposed regs on the Affordable Care Act’s “Employer Shared Responsibility” provision, along with a practical Q&A with real-life examples for employers. Here’s help making sense of it all.

At this point, virtually every organization knows that all “large” employers — those with 50 or more full-time employees — must provide all full-time equivalent employees (FTEs) with health insurance or pay a “shared-responsibility” penalty.

Obamacare considers individuals who work at least 30 hours each week to be an FTE,

However, many employers will be surprised by at least one clarification the IRS offered regarding the shared-responsibility regs.

No guarantee for spouses, dependents

The clarification: While large employers are required to offer family coverage under the health reform law, they aren’t required to make it affordable, and they won’t be penalized if employees can’t afford the family coverage.

According to the IRS rules, the meaning of “affordable” hinges entirely on the healthcare costs for the employees — or “self-only coverage.”

Many employers had been under the assumption that the requirement to provide affordable coverage naturally extended to employees’ spouses and dependents.

Summary of previous guidance

With the release of the new proposed rule, the IRS has effectively combined all of its previous guidance into one set of regs, with a few minor modifications and clarifications.

The good news is that if you’ve been keeping up with all of the IRS’s previous guidance, the proposed rules should look very familiar.

However, even if you’re not well-versed with previous info, Ilyse Schuman from the blog Employee Benefits Counsel broke down the proposed rules and Q&A into three major areas: Which Employers are Subject to the Employer Shared Responsibility provisions? Determining full-time employees and How is the Play-or-Pay Penalty Assessed?

Here are two other important points of clarification in the proposed rule:

  • Companies that have a common owner (or are related) are generally combined together to determine whether they employ at least 50 full-time employees — or a combination of full- and part-time workers that equals that amount, and
  • The final shared-responsibility rule will include an anti-abuse provision to keep companies from using temporary staffing agencies for the express purpose of evading their obligations under the health reform law.

The IRS is currently accepting public comments on its proposed regs until March 18, 2013.

In addition, we previously offered details on IRS-approved methods on how employers can calculate the number of FTEs they employ.


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  • SuperDave

    Apparently the Democrats were too hastily ramrodding the 2000+ page legislation down to remember that spouses and children should also have affordable healthcare.
    I guess these kind of mistakes happen when we have partisan laws that most Americans oppose.