ERIC to Regulators: Ensure that Shared Responsibility Provisions Do Not Unfairly Penalize Employers

June 17, 2011


ERIC on June 17 submitted to the Treasury Department and IRS separate letters offering detailed recommendations on how to apply and implement the employer shared responsibility provisions and the 90-day waiting period under the Patient Protection and Affordable Care Act (ACA).

ERIC's letters can be accessed by clicking on the links below.

ERIC Comments on Shared Responsibility

ERIC Comments on 90-Day Waiting Period

The Treasury Department and IRS on May 3 requested comments (Notice 2011-36) on issues relating to the shared responsibility provisions included in the ACA, where beginning in 2014 employers with 50 or more full-time employees that do not offer health coverage to their full-time employees may be required to pay a penalty. The notice also requests input on how the government should apply the ACA's provisions limiting the ability of plans and issuers to impose a waiting period for health coverage of longer than 90 days.

ERIC urged the agencies to ensure that the shared responsibility provisions do not unfairly penalize employers that provide comprehensive, affordable health care to the majority of workers and their families. To that end, ERIC strongly endorsed the proposal in the notice that Internal Revenue Code section 4980H(a) liability should not apply to an employer that offers minimum essential coverage to substantially all of its employees.

The letter explained that the most compelling concern for ERIC's members is the provision imposing section 4980H(a) liability. If this provision is interpreted broadly, it could require an employer to pay a penalty for hundreds of thousands of employees merely because one full-time employee does not receive minimum essential coverage, ERIC said. In addition, the letter contends that this result is not required by the statute and is contrary to the purpose of the shared responsibility provisions.

ERIC's recommendations on the shared responsibility provisions include that the section 4980H(a) liability:

  • Should not apply with respect to employees who are offered minimum essential coverage;

  • Should apply on an employer-by-employer basis rather than on a controlled-group basis; and

  • Should not apply with respect to nonresident aliens and other employees who are exempt from the individual mandate.

ERIC also expresses concern that the requirement to count hours of service to identify full-time employees will impose a substantial administrative burden on employers with tens of thousands of workers employed by diverse businesses around the world, and offers several recommendations to address this issue.

While the use of "measurement" and "stability" periods should be helpful in reducing the administrative burden on large employers, ERIC also offers a number of suggestions that would preserve the flexibility of employers who wish to utilize this approach.

In a separate letter, ERIC offers detailed recommendations on the ACA's provisions prohibiting plans and insurers from applying a waiting period in excess of 90 days.

ERIC also urges the Departments of Treasury/IRS, Labor, and Health and Human Services to coordinate the shared responsibility rules under section 4980H with the 90-day waiting period limitation, including that the shared responsibility penalties under section 4980H should not apply during a waiting period.


For more information:
Ted Godbout
Director, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: (202) 789-1400