Health care reform: preparations for 2014 pay or play rules should begin now

By far the most important issue for employers to consider under the Affordable Care Act (ACA) is the employer “free rider penalty,” often referred to as “pay or play.” Instead of forcing employers to provide group health insurance to employees, ACA imposes a tax on employers if they don’t offer coverage to all or substantially all of their full-time employees (and their dependents), or if that coverage fails to meet certain conditions. This “pay or play” tax is memorialized in Section 4980H of the Internal Revenue Code. The IRS recently issued comprehensive proposed regulations on pay or play, which summarize and synthesize previous IRS notices and sub-regulatory guidance.