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Executive Order Does Not Release Employers From Shared Responsibility Payments

August 14, 2017

The Internal Revenue Service (IRS) has issued two information letters in response to inquiries about employer shared responsibility payments (ESRP) under the Patient Protection and Affordable Care Act (ACA).

In the letters, the IRS emphasizes that, despite a recent executive order issued by the Trump administration, Code Sec. 4980H still provides that, if an applicable large employer (generally, one with at least 50 full-time employees, including full-time equivalent employees) fails to offer health coverage to its employees, it may be liable for the ESRP. The IRS adds that there is no provision in the ACA that provides for a waiver of the ESRP.

In one of the letters, to House Rep. Bill Huizenga (MI-R), the IRS explains that the ESRP can generally be triggered if an employer either fails to offer minimum essential health coverage to employees and their dependents, or if it offers minimum essential coverage, but at least one full-time employee is allowed a premium tax credit because the coverage offered does not provide minimum value or is not affordable.

Executive order. The IRS cautions that the Trump administration’s recent “Executive Order Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” (January 20, 2017) merely directed federal agencies to exercise their authority and discretion to reduce the ACA’s potential burden. The Executive Order does not, however, change the law, the IRS says, and, until they are changed by Congress, the ACA’s legislative provisions are still in force.

Therefore, taxpayers are still obliged to follow the law, and pay the ESRP, if owed. The IRS directs taxpayers to for more information.

The IRS also advised in the letter to Rep. Huizenga that eligible nonprofit religious organizations that object to providing coverage for contraceptive services on religious grounds can seek to exclude this coverage from their health plans under the 2015 Final Rules on Coverage of Certain Preventive Services under the ACA.