The Treasury Department and the Internal Revenue Service (IRS) are soliciting input on a variety of issues related to the shared responsibility provisions of the health care reform law that take effect for employers with 50 or more employees beginning in 2014. Under the Affordable Care Act’s shared responsibility requirement, commonly referred to as the “pay or play” mandate, employers with 50 or more employees must provide minimal essential health coverage to their full-time employees or pay a penalty. The IRS Notice 2011-36 (pdf) invites comments on a number of possible rules, definitions and approaches for interpreting and applying these employer responsibility requirements. According to an IRS press release, the request for public comments “is designed to ensure that Treasury and IRS continue to receive broad input from stakeholders on how best to implement the shared responsibility provisions in a way that is workable and administrable for employers, allowing them flexibility and minimizing burdens.”

The 22-page Notice is divided into six sections. The first section discusses the purpose of the notice itself. The document emphasizes that it does not constitute guidance, but rather “describes potential approaches, which could be incorporated in future proposed regulations, to certain discrete issues under [the shared responsibility provision], particularly the issue of who is a full-time employee, and invites comments on these approaches.”

The second section examines the background of the employer responsibility provision (§ 4980H) of the Affordable Care Act that lays out the pay-or-play requirements. The third section addresses potential definitions of “employer,” “employee” and “hours of service” and describes ways that hours of service could be calculated for hourly and non-hourly employees. The fourth section describes a possible method for determining whether an employer is an “applicable large employer” for a calendar year, and therefore subject to assessable payments under § 4980H.

Section five outlines possible rules that could be used to determine an employee’s full-time status for purposes of calculating an employer’s assessable payment under § 4980H. As discussed in the Notice, an applicable large employer’s potential § 4980H(a) liability “is determined by reference to the number of full-time employees employed for a given month, and an applicable large employer’s potential § 4980H(b) liability is determined by reference to the number of full-time employees with respect to whom an applicable premium tax credit or cost-sharing reduction is allowed or paid for a given month.” The Notice acknowledges that the determination of full-time employee status on a monthly basis for the purposes of calculating liability may cause practical difficulties for employers, employees, and the future state health insurance exchanges. Such difficulties include “uncertainty and inability to predictably identify which employees are considered full-time and, consequently, inability to forecast or avoid potential § 4980H liability,” an issue that may be particularly problematic for employees that do not work regular schedules. Accordingly, the Notice explains that the Treasury and the IRS are considering proposing possible alternatives to a month-by-month determination of full-time employee status for purposes of calculating an applicable large employer’s potential assessable payment. One such proposal would “permit applicable large employers, at their option, to use a look-back/stability period safe harbor that would provide certainty as to which employees would be considered full-time for a particular coverage period. Such an approach also would be designed to give effect to the statutory provisions while accommodating a wide variety of current eligibility and enrollment practices in group health plans.” The Notice seeks comment on this “look-back/stability period safe harbor” method, which section five of the Notice describes in great detail.

The final section contains a general request for comments, including input on the interaction of the rules under § 4980H with certain other provisions of the Affordable Care Act, and how the IRS, Department of Labor, and the Treasury should interpret and apply the Act’s provisions limiting the ability of plans and issuers to impose a waiting period for health coverage of longer than 90 days starting in 2014.

Comments must be received by June 17, 2011, and may be submitted via email to: Notice.Comments@irscounsel.treas.gov (include “Notice 2011-36” in the subject line); by mail to: Internal Revenue Service, CC:PA:LPD:PR (Notice 2011-36), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044; or by hand-delivery to: CC:PA:LPD:PR (Notice 2011-36), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC, between 8 a.m. and 4 p.m., Monday through Friday.