The written testimony of a U.S. Department of the Treasury official before the House Committee on Ways and Means Subcommittee on Health was published on July 17, 2013. This testimony, given by J. Mark Iwry, Senior Advisor to the Secretary and Deputy Assistant Secretary for Retirement and Health Policy, describes the decision to delay the reporting requirements under Code 6055 and 6056, and, as a result, the delayed collection of employer penalties under Code 4980H(a) and (b). The reporting requirements and penalties will now be enforced beginning January 1, 2015.
Citing concerns that employers may not be able to comply “effectively and efficiently” with the reporting requirements in time, Treasury announced that employers would have an additional year to prepare to meet this obligation. Under Code 6056, employers must provide an annual information return to the IRS detailing information about the employer and the employer’s health plan, including the eligibility waiting period, the number of full time employees during each calendar month of the preceding year, the employee’s monthly share of the premiums for self-only coverage for the employer’s lowest cost plan option, and other detailed information. Employers expressed a number of concerns surrounding their ability to effectively gather the information required to be reported.
Because the information returns required under Code 6055 and 6056 are the mechanisms by which the IRS determines if an employer owes a penalty under Code 4980H(a) or (b) as well as the amount of the penalty, the Treasury also delayed the collection of the penalties for one more year. Although the Treasury has encouraged voluntary compliance with the reporting requirements during 2014, it appears that there is no additional good faith compliance requirement imposed on employers during the delay. It seems highly unlikely that employers will in fact choose to voluntarily comply with the rather burdensome reporting requirements in 2014.
Perhaps the most interesting portion of the testimony is the section addressing the authority of the Treasury to delay these requirements. Referencing IRS Notice 2013-45 implementing the delay, Treasury reinforces its “longstanding administrative authority under section 7805(a) of the Internal Revenue Code.” The written testimony then proceeds to cite a plethora of IRS Notices back to 2000 addressing transition relief provided for various other tax penalties “when immediate application would have subjected taxpayers to unreasonable administrative burdens or costs.” It is worth noting that this testimony comes on the heels of many questions regarding the authority of the Treasury and the Obama Administration to delay the penalties, as well as a House bill that will codify the transition relief.
For a copy of the written testimony, click here.
