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Obama Administration Announces Delay of Pay or Play Penalties under Affordable Care Act


July 3, 2013

In 21st Century America, a single blog post can apparently change everything.  Yesterday, a Treasury Notes blog post revealed that the Affordable Care Act’s pay or play penalties and reporting will be delayed one year, until 2015.  Pay or play penalties and reporting were set to take effect in 2014, so this transitional relief will come as welcome news to employers.  The Treasury Department noted it would publish formal guidance within the next week describing this transition.

Employers will now be asking, “What does this mean for us?”  The simple answer is that employers will not be assessed a pay or play penalty in 2014, and will have additional time until 2015 to plan for compliance with their reporting obligations and with the pay or play rules in general.  Employers that planned on “paying” the penalty will not have to do so in 2014.  Employers that planned on “playing” by offering coverage to substantially all of their full-time employees will have additional time to consider their options.  Many employers will choose to continue with their original strategy of covering full-time employees, but will now have additional time to perfect their methodologies for tracking employee hours.  This transitional relief may also allow employers to monitor the success of state health care exchanges in 2014, to determine whether simply paying the penalty is a reasonable option.  Employers will also have flexibility in 2014 in terms of how much to charge employees for coverage, without the possibility of a pay or play penalty if employee contributions are “unaffordable” under the law.   

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