Employment, Labor & Benefits Advisory: Treasury/IRS Propose Safe Harbor under Affordable Care Act’s Employer Responsibility Rule for Determining “Household Income”
10/6/2011
The employer responsibility provisions of the Patient Protection and Affordable Care Act (the Act) generally require “applicable large employers” — i.e., those with more than 50 full-time equivalent employees — to pay an assessable payment or penalty if any of the employer’s full-time employees is certified to receive a premium tax credit toward, or cost-sharing reduction in connection with, the purchase of health insurance through a state-based insurance exchange. The amount of penalty varies depending on whether the employee offers to its full-time employees “minimum essential coverage” under an eligible employer-sponsored plan and, if so, whether that coverage provides “minimum value” and is “affordable.” Coverage under an eligible employer-sponsored plan is not affordable if the employee-provided premium for self-only coverage exceeds 9.5% of the employee’s “household income.” In Notice 2011-73, the Internal Revenue Service proposed and solicits comments on a safe harbor under which an employee’s “household income” is presumed to equal his or her W-2 wages solely for purposes of determining the amount of the employer penalty. This client advisory explains the impact of Notice 2011-73.
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