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The IRS today released an advance copy of Notice 2011-73 which proposes an “affordability safe harbor” for employers, to address practical difficulties that employers may encounter in assessing whether healthcare coverage that they offer is affordable to certain employees.
For an electronic version of the seven-page notice:
Notice 2011-73
Overview
As noted in a related IRS release (IR-2011-92, September 13, 2011), the shared responsibility provisions will apply to certain employers starting in 2014—that is, those employers with 50 or more full-time employees that do not offer affordable health coverage to their full-time employees. For these employers, they may be required to make a shared responsibility payment.
The proposed safe harbor contained in Notice 2011-73 is intended to make it easier for employers to determine whether the health coverage they offer is affordable, thus allowing employers that offer coverage to their employees to measure the affordability of that coverage by using wages that the employer paid to an employee (instead of the employee’s household income). This safe harbor would only apply for purposes of the employer shared responsibility provision, and would not affect employees’ eligibility for health insurance premium tax credits.
Notice 2011-73 includes a request for comments as part of the continuation of the process of developing regulatory guidance on the shared employer responsibility provisions of section 4980H. Comments are requested concerning certain issues, including:
- Whether or how wages and employee contribution amounts would need to be determined for employees who are employed by an employer for less than a full year, employees who move between full-time and part-time status, situations in which the plan year is not a calendar year, and other similar special circumstances
- Whether there are other possible safe harbor methods for determining the affordability of coverage under an employer-sponsored plan for purposes of calculating an employer’s potential assessable payment under section 4980H(b)
- How to coordinate any affordability safe harbor with the full-time employee look-back/stability safe harbor described in
Notice 2011-36
Comments are due by December 13, 2011.
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Notice 2011-73 will appear in Internal Revenue Bulletin 2011-40, dated October 3, 2011.
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ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
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