The ACA shared responsibility excise tax’s missing link: employer rights

Back in 2011, I mentioned a missing link in the health care reform Section 4980H shared responsibility employer excise tax scheme. 42 U.S.C. Section 18081 requires the establishment of an appeals and redeterminations process for penalty assessments, and acknowledges a problem with the provision itself. It requires the Secretary of Health and Human Services to consult with the Secretary of Treasury, study administration of employer responsibility, and provide a report to certain Congressional committees by Jan. 1, 2013. This report was to address the procedures and/or legislative changes necessary to ensure the following rights are protected:

(A) The rights of employees to preserve their right to confidentiality of their taxpayer return information and their right to enroll in a qualified health plan through an exchange if an employer does not provide affordable coverage.

(B) The rights of employers to adequate due process and access to information necessary to accurately determine any payment assessed on employers.

Also See: ACA, data security create regulatory hurdles for employers

How does an employer have access to information necessary to accurately determine any payment assessed, when the statute prohibits the agencies from sharing any taxpayer return information with the employer, except “whether or not the employee’s income is above or below the threshold by which the affordability of the employer’s health insurance coverage is measured?” The statute provides that whether or not the coverage is affordable is determined based upon household Modified Adjusted Gross Income, and I am not entirely sure what “the threshold” means.

There seems to be a presumption that the Internal Revenue Service is going to start assessing Section 4980H excise taxes against employers in mid-2016. But the Fifth Amendment to the Constitution prohibits the federal government from depriving persons of property without due process of law, and as the Supreme Court just reminded us in Hobby Lobby, employers are persons, too. Is it even possible to craft procedures that will protect employers’ rights in accordance with the Constitution and the provisions of the statute? I don’t think so. If the Secretary’s report was ever provided to the committees, that has not been publicized. And IRS Questions and Answers  (#27 and #28) gave us a peak at penalty assessment, but noticeably absent is any explanation about how the IRS is going protect employers’ rights. It appears the IRS may literally need an act of Congress before it can collect these excise taxes.

Also See: Senate bill to overturn SCOTUS Hobby Lobby decision blocked

Ann Caresani, a partner Porter Wright Morris & Arthur’s Cleveland/Akron, Ohio area, focuses her practice on employee benefits, ERISA and executive compensation. As editor of the firm’s employee benefits blog — Employee Benefits Law Report — and the ERISA preemption chapter of ERISA, A Comprehensive Guide (published by CCH), Caresani consistently reviews recent cases, legislation, regulations, and other employee benefits law developments and helps our clients understand how these changes may impact their organizations.