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Obama Administration Announces a One-Year Delay in the Enforcement of the Affordable Care Act's Employer Shared Responsibility (a/k/a "Pay-or-Play") Rules

By Alden J. Bianchi

In a surprise announcement posted yesterday to the White’s House website, the Obama Administration announced a one-year delay (to January 1, 2105) in the enforcement of the employer shared responsibility rules enacted into law by the Patient Protection and Affordable Care Act.


The Act’s employer shared responsibility rules apply only to “applicable large employers,” i.e., employers with 50 or more full-time and full-time equivalent employees. Beginning in 2014, these employers are subject to a non-deductible excise tax—or, in the parlance of the statute—for failing to make an offer of “minimum essential coverage” under and “eligible employer-sponsored plan” to at least 95% of it full-time employees.  (Full-time for this purposes means an employee who works on average 30 hours per week or 130 hours per month).  In practice, this requires that employer offer of some sort of medical coverage to these employees.

Where an employer fails does not make such an offer of coverage, and if at least one employee qualifies for premium assistance from a public exchange or marketplace, the Act imposes an annual penalty $2000 penalty multiplied by the number of the employers’ full-time employees, less the first 30.  If, on the other hand, the employer does make the requisite offer of coverage, the penalty depends on the particulars of the coverage offered:

  • If the coverage is either unaffordable or is not sufficiently robust, the annual penalty is a $3,000 multiplied by just the number of employees who qualify for premium assistance.
  • If the coverage is both unaffordable and sufficiently robust, there is no penalty.

The Administration’s Announcement

The delay in the enforcement of the employer shared responsibility rules was announced in postings to the websites of both the White House ( and the Treasury Department (  Recognizing the complexity of the law and the need to fashion regulations that account of the concerns expressed by businesses particularly surrounding the need to simplify the reporting process, the administration made the following two points:

  • First, we are cutting red tape and simplifying the reporting process. We have heard the concern that the reporting called for under the law about each worker’s access to and enrollment in health insurance requires new data collection systems and coordination. So we plan to re-vamp and simplify the reporting process. Some of this detailed reporting may be unnecessary for businesses that more than meet the minimum standards in the law. We will convene employers, insurers, and experts to propose a smarter system and, in the interim, suspend reporting for 2014.
  • Second, we are giving businesses more time to comply. As we make these changes, we believe we need to give employers more time to comply with the new rules. Since employer responsibility payments can only be assessed based on this new reporting, payments won’t be collected for 2014. This allows employers the time to test the new reporting systems and make any necessary adaptations to their health benefits while staying the course toward making health coverage more affordable and accessible for their workers.


Business groups are generally elated with the announcement, and with good reason.  The Act’s reporting rules are burdensome, to be sure.  The delay takes the pressure of the regulators to issue a rule prematurely.  Proposed regulations issued at the end of 2012 under the employer shared responsibility rules included a good deal of flexibility, but that flexibility came at the cost of complexity.  The delay gives employers more time to navigate these rules.  It also for the most part renders moot certain transition rules that required employers to take hours of service into account before January 1, 2014.

The delay will also likely be welcome by state-licensed insurance carriers who have been slow to develop products for the large group market.  While the standards for plan actuarial value (or plan generosity) in the individual and small group as contrasted with the large group market and self-funded plans both refer to a 60% threshold for covering plan costs, the products are different.  The delay should give carriers the time to make plans available for large groups that are tailored to the specific requirements of the law.

Lastly, the Treasury Department and the IRS will need modify existing guidance to take account of the delay.  They will also need to decide how to coordinate this delay with other provisions of the Act.  For example, should the potential lack of access to employer coverage impact an employee’s exposure to a tax penalty for failing to have coverage?  Or, should a low-income employee who is eligible for employer-sponsored coverage be denied access to a premium subsidy in 2014 despite that the employer will incur no penalty.

While the delay in the implementation of the employer shared responsibility is welcome, employers would be wise to use this opportunity to focus on, rather than simply not think about, these rules.  While they have been deferred, they still represent a formidable compliance challenge.

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Martha Zackin