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Jackson Lewis Attorneys Discuss 'Shared Responsibility' Penalty of Health Care Reform Law

By Monique Warren, Joseph J. Lazzarotti, Lisa M. deFilippis, Joy M. Napier-Joyce, Kathleen Reilly Barrow, Randal M. Limbeck, Jay Adams Knight and Melissa Ostrower
  • February 27, 2013

The “employer responsibility” portion of the 2010 health care reform law (otherwise known as the “pay or play penalty”) requires employers with at least 50 full-time employees to provide minimum essential coverage or pay a tax penalty beginning in 2014. The Internal Revenue Service has released proposed regulations on this aspect of the health care reform law. (For details of the proposed regulations, see our article, Health Care Reform Update: IRS Proposes Regulations on Employer Penalty.) Two Jackson Lewis Employee Benefits attorneys and members of the firm’s Health Care Reform Task Force recently presented Health Care Reform: Employer “Shared Responsibility” Penalty, a one-hour webinar addressing key aspects of the pay or play penalty.

After providing a brief overview of the component pieces of comprehensive health care reform, the presenters focused on the recent proposed regulations and IRS notices regarding the 2014 employer shared responsibility provisions. As the presenters explained, the pay or play penalty applies only to “large” employers, those with at least 50 full-time or full-time equivalent employees, that do not provide affordable minimum essential coverage for full-time employees and their dependents and have at least one full-time employee who receives subsidized Exchange coverage. The presenters detailed the process for determining whether an employer is large enough to be subject to the penalty provisions in the first place, including an explanation of how full-time employee status would be determined.

The presenters also explained what it means to “offer coverage” and discussed what “minimum essential coverage” means under the law. “Minimum essential coverage,” they said, could include coverage under a grandfathered plan, an eligible employer-sponsored plan, an individual plan, Medicare, Medicaid, CHIP, and TRICARE, among others. In addition, for employer-sponsored coverage to be minimum essential coverage, it must meet either an affordability test (i.e., self-only coverage costs no more than 9.5% of income) or minimum value test (i.e., the plan’s share of total allowed cost of benefits must be at least 60% of covered costs). 

The webinar concluded with an overview of how to decide whether to “pay or avoid the penalty.” According to the presenters, there is “no silver bullet or single strategy or automated formula that is going to work for every employer. Instead each employer has to consider its circumstances and business goals.” The presenters also noted that the law in this area is still in flux.

The webinar speakers were Jackson Lewis Partner Monique Warren and Of Counsel Melissa Ostrower. Health Care Reform: Employer “Shared Responsibility” Penalty can be viewed at any time by clicking here. In addition, comprehensive information regarding what employers need to know about the health care reform law is available on Jackson Lewis’ Health Care Reform Resource Center, which can be accessed by clicking here.

If you have any questions about health care reform, please contact a member of the Health Care Reform Task Force or the Jackson Lewis employee benefits law attorney with whom you normally work.


©2013 Jackson Lewis P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis.

This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.

Jackson Lewis P.C. represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Jackson Lewis attorney with whom you regularly work.

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