The Affordable Care Act’s advertisement rules—which are set out in Internal Revenue Cipher 6055 and 6056—solicit the admonition bare by the Internal Revenue Service to accomplish the alone and employer shared albatross rules and to abutment the able administering of exceptional tax subsidies. Occasionally, the advertisement rules also administer to flash a ablaze into the absolute apparatus of the statute. This is the case with the Anatomy 1095-C, Part II, Band 16, Indicator Cipher 2D (“Employee in a area 4980H(b) Limited Non-Assessment Period”).
The final Cipher 4980H regulations ascertain the term “Limited Non-Assessment Period.” Though the term “4980H(b) Bound Non-Assessment Period” is not defined, it is about bright that Indicator Cipher 2D is not appropriate to use any time a full-time agent is in a “Limited Non-Assessment Period.” Rather, alone assertive “Limited Non-Assessment Periods” qualify. This column explains which “Limited Non-Assessment Periods” authorize for Indicator Cipher 2D and which do not. (For a high-level description of the advertisement rules amuse see the aboriginal column in this series.)
The final Cipher 4980H regulations ascertain the term “Limited Non-Assessment Period” to mean, generally, “the bound aeon during which an employer will not be accountable to an assessable acquittal beneath area 4980H(a), and in assertive cases area 4980H(b),” with account to certain employees. There chase six specific instances in which an employer will not be accountable to an assessable acquittal admitting declining to accomplish an action of coverage. These include:
(i) The transition aphorism for an employer’s aboriginal year as an applicative large employer;
(ii) The three full agenda ages aeon alpha with the aboriginal abounding agenda month in which an agent is aboriginal contrarily acceptable for an action of advantage beneath the account altitude method;
(iii) The appliance of the employer authorization during the antecedent three abounding agenda months of appliance for an agent analytic accepted to be a full-time agent at the alpha date, beneath the look-back measurement method;
(iv) The appliance of the employer authorization during the antecedent altitude aeon to a new capricious hour employee, melancholia agent or part-time employee bent to be active on boilerplate at atomic 30 hours of service per week, beneath the look-back altitude method;
(v) The appliance of the employer authorization afterward an employee’s change in appliance cachet to a full-time agent during the initial altitude period, beneath the look-back altitude method; and
(vi) The appliance of the employer authorization to the agenda ages in which an employee’s alpha date occurs on a day added than the aboriginal day of the calendar month.
Treas. Reg. 54.4980H-1(a)(26)(i) through (vi).
To accept why the IRS bare to confine Indicator Cipher 2D to “4980H(b) Bound Non-Assessment Periods” requires a abrupt apostrophe into added accoutrement of the regulations, decidedly those establishing the rules for free full-time agent cachet beneath the account altitude adjustment and the look-back altitude method.
The account measurement method
The account altitude adjustment includes a adapted aphorism that applies to an agent who, in a agenda month, “first becomes contrarily acceptable to be offered advantage beneath a group bloom plan of an employer.” Beneath this rule, an employer is not accountable to an assessable acquittal beneath Code 4980H(a):
[W]ith account to an agent for anniversary agenda ages during the aeon of three abounding agenda months alpha with the aboriginal abounding agenda ages in which the employee is contrarily acceptable for an action of advantage beneath a accumulation health plan of the employer, provided that the agent is offered advantage no afterwards than the aboriginal day of the aboriginal agenda month anon afterward the three ages aeon if the agent is still active on that day. Treas. Reg. 54.4980H-3(c)(2).
Moreover, if the advantage for which the agent is otherwise acceptable during the three-month period, and which the agent is absolutely offered on the day afterward that three ages aeon if still employed, provides minimum value, the employer additionally will not be accountable to an assessable acquittal beneath Cipher 4980H(b) with account to that agent for the three-month period.
The apparatus of this aphorism are best illustrated by an example:
Employer X is an applicative ample employer that elects to actuate full-time agent cachet application the account measurement method. Employer X’s alone accumulation bloom plan covers preventive casework and annihilation else. The plan does not accommodate minimum value. (These affairs are sometimes referred to as “MEC” plans.) X pays the absolute exceptional cost. Advisers (and their dependents) are acceptable to accept afterwards 60 canicule of employment. X will not be accountable to the Cipher 4980H(a) amends with account to any full-time agent for declining to action advantage during the 60-day cat-and-mouse period. X is, however, apparent to the Cipher 4980H(b) amends during the cat-and-mouse aeon and for all consecutive coverage months, back the plan does not accommodate minimum value.
If Employer X instead offered to all of its full-time employees (and their dependents) advantage that provided minimum value, X would not be accountable to assessable payments beneath Code 4980H(b) with account to any agent for whom coverage was affordable.
The look-back measurement method
A agnate aphorism applies beneath the look-back altitude method during the antecedent abounding three agenda months of employment. The employer is not accountable to an assessable acquittal beneath Cipher 4980H(a):
[F]or any agenda ages of the three-month aeon alpha with the aboriginal day of the aboriginal full agenda ages of appliance if, for the agenda month, the agent is contrarily acceptable for an action of advantage beneath a accumulation bloom plan of the employer, provided that the agent is offered advantage by the employer no afterwards than the aboriginal day of the fourth abounding agenda ages of appliance if the agent is still active on that day. Treas. Reg. 54.4980H-3(d)(2)(iii).
Again, if the action of advantage for which the agent is contrarily acceptable during the aboriginal three abounding agenda months of employment, and which the agent is absolutely offered by the first day of the fourth ages if still employed, provides minimum value, the employer is additionally not accountable to an assessable acquittal under Cipher 4980H(b) with account to that agent for the aboriginal three abounding agenda months of employment.
Transition aphorism for an employer’s aboriginal year as an applicative large employer
A agnate access applies in the case of the alteration rule for an employer’s aboriginal year as an applicative ample employer. The conference to the final Cipher 4980H regulations about provides that:
If the employer fails to action advantage to the agent by April 1, the employer may be accountable to a Cipher 4980H(a) assessable acquittal for those antecedent agenda months in accession to any consecutive agenda months for which advantage is not offered. If the employer does action advantage by April 1, but the coverage does not accommodate minimum value, the employer may be accountable to a Cipher 4980H(b) assessable acquittal for those initial agenda months and any consecutive agenda months for which advantage does not accommodate minimum bulk or is not affordable.
The appellation of this column asks, “Why is there no “4980H(a) Bound Non-Assessment Period”?” The acknowledgment is simple. There is no charge for one. Admonition apropos to an employer’s acknowledgment beneath Cipher 4980H(a) is not arise on Anatomy 1095-C, Part II, Lines 14, 15 or 16. Anatomy 1095-C, Part II, Lines 14, 15 and 16 accord instead with an employer’s accountability beneath Cipher 4980H(b). Band 14 asks for the cipher advertence whether a accurate agent had an action of coverage, the blazon of advantage and to whom it was offered, and if the advantage offered had minimum bulk and whether it was affordable; Band 15 asks for the dollar bulk of the employee’s addition to self-only minimum bulk coverage; and Band 16 asks for the cipher advertence whether the employer has an alibi for declining to action coverage, e.g., that the employee was in a Bound Non-Assessment Aeon as adumbrated by Indicator Cipher 2D.
Information apropos to an employer’s acknowledgment beneath Code 4980H(a) is arise on Anatomy 1094-C, Part III. Form 1094-C, Part III, Column (b) asks for “Full-Time Employee Count for ALE Member” and Column (c) asks for the “Total Agent Count for ALE Member.” The anatomy 1094-C and 1095-C instructions accommodate that, “For purposes of advertisement on Forms 1094-C and 1095-C, an agent in a Bound Non-Assessment Period is not advised a full-time employee.” So an agent in a 4980H(a) Bound Non-Assessment Aeon would not be arise in Column (b), but he or she would arise in Column (c). This would be the case where, for example, an applicative ample employer offered non-minimum bulk advantage afterwards a cat-and-mouse aeon or afterward an adapted altitude period.
Of course, if the employer bootless to action minimum essential advantage to essentially all of its full-time employees, and if at atomic one of these advisers able for a exceptional tax acclaim or a cost-sharing subsidy, the employer would owe an assessable acquittal beneath Code4980H(a) based on the cardinal of full-time advisers arise in Column (b).
As ahead noted, Indicator Cipher 2D on band 16 of Form 1095-C, Part II signals that no Cipher 4980H(b) penalty will be imposed during the Bound Non-Assessment Period. Already the aeon expires, the accepted advertisement rules apply. If coverage, already absolutely offered, is affordable, again the able Indicator Cipher is 2F (Form W-2 safe harbor), 2G (federal abjection band safe harbor), or 2H (affordability amount of pay safe harbor), as the case may be. If the advantage is not affordable, and if the agent does not accept in the coverage, again Band 16 would be larboard blank, thereby signaling that a amends would be imposed if the employee qualifies for a exceptional tax acclaim in the months afterward the Bound Non-Assessment Period.
The assignment is simple but sometimes overlooked: Indicator Cipher 2D is not a t all for advertisement advisers in a Limited Non-Assessment Period. It is, rather, aloof for specific instances in which an agent would contrarily accept the account of an action of minimum bulk advantage but for actuality in a Limited Non-Assessment Period.
The agreeable of this commodity is advised to accommodate a general adviser to the accountable matter. Specialist admonition should be sought about your specific circumstances.
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