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Health Care Reform: IRS Issues Proposed “Pay or Play” Regulations


January 2013

The IRS issued proposed regulations on the Affordable Care Act’s “pay or play” requirement, which is the most important aspect of the ACA for employers. Among many other topics, the proposed regulations clarify that coverage must be offered to at least 95% of an employer’s full-time employees, that the cost of self-only coverage is all that an employer needs to consider when determining whether its coverage is “affordable” for purposes of avoiding pay or play taxes, and that there are a number of design-based safe harbors that an employer can use to ensure its coverage is considered affordable for every employee. The IRS has informally (yet very clearly) stated that employers should rely on these proposed regulations in their planning for pay or play, and that employers should immediately begin this planning in anticipation of the 2014 effective date. Our alert, “Health Care Reform: Preparations for 2014 Pay or Play Rules Should Begin Now,” from January provides a number of strategic considerations for employers as they prepare for the beginning of pay or play in 2014. 

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