IRS Provides Relief for ACA Individual Mandate

July 1, 2013 ( – The Internal Revenue Service (IRS) has announced transitional relief from the shared responsibility requirement of the Affordable Care Act (ACA) for certain individuals.

In Notice 2013-42, the agency provides relief from the ACA § 5000A shared responsibility payment for specified individuals who are eligible to enroll in certain eligible employer-sponsored health plans with a plan year other than a calendar year (non-calendar year plans) if the plan year begins in 2013 and ends in 2014.

For each month beginning after December 31, 2013, § 5000A requires individuals who are not exempt to either maintain minimum essential coverage for themselves and any nonexempt family members or include an individual shared responsibility payment with their federal income tax return. A taxpayer is liable under § 5000A for any nonexempt individual whom the taxpayer may claim as a dependent. The proposed regulations provide that an individual has minimum essential coverage for a month in which the individual is enrolled in and entitled to receive benefits under a program or plan identified as minimum essential coverage.

The IRS recognized that many employer-sponsored plans have a non-calendar plan year. Generally, eligible employer-sponsored plans do not permit employees to enroll in the plan after the beginning of a plan year unless certain triggering events occur, such as a change in employment status. Without transition relief, therefore, many individuals eligible to enroll in non-calendar year eligible employer-sponsored plans would need to enroll in eligible employer-sponsored plans in 2013, when § 5000A does not yet apply, in order to maintain coverage under an eligible employer-sponsored plan for months in 2014, when § 5000A applies.

According to the IRS Notice, in order to provide transition relief during the first year that § 5000A applies to individual taxpayers, an employee, or an individual having a relationship to the employee, who is eligible to enroll in a non-calendar year eligible employer-sponsored plan with a plan year beginning in 2013 and ending in 2014 (the 2013 to 2014 plan year) will not be liable for the § 5000A shared responsibility payment for certain months in 2014. The transition relief begins in January 2014 and continues through the month in which the 2013 to 2014 plan year ends.

The agency noted that the relief provided by the Notice applies only for determining a taxpayer’s § 5000A shared responsibility payment for not maintaining minimum essential coverage. Any month in 2014 for which an individual is eligible for the transition relief provided by this notice will not be counted in determining a continuous period of less than three months for purposes of the short coverage gap exemption described in § 5000A(e)(4).

Notice 2013-42 is here.