The IRS has yet again bailed out the Congress after a new law imposed a deadline for taking action that was simply unworkable (in this case, for calendar year plans 90 days after the law was enacted). In Notice 2017-20 the IRS has granted relief from notices that were required to be given to employees eligible to be covered by a qualified small employer health reimbursement arrangement (QSEHRA), a requirement added by the 21st Century Cures Act that enacted December 13, 2016.
An employer with fewer than 50 employees who does not offer group plan to any employees is eligible to establish a qualified small employer health reimbursement arrangement. [IRC §9831(d)] However, an employer establishing such an arrangement is required to give written notice to all eligible employees at least 90 days before the beginning of a year for which a QSEHRA is provided. [IRC §9831(d)(4)]
The required statement must provide the following:
- A statement of the amount that would be the eligible employee’s permitted benefit under the arrangement for the year;
- A statement that the eligible employee should provide the information described above to any health insurance exchange to which the employee applies for advance payment of the premium tax credit; and
- A statement that if the eligible employee is not covered under minimum essential coverage for any month, the employee may be liable for an individual shared responsibility payment under section 5000A for that month and reimbursements under the arrangement may be includible in gross income. [IRC §9831(d)(4)(B)]
An employer that fails to give such notice will face a penalty of $50 per employee per incidence of failure, with a maximum penalty of $2,500. [IRC §6652(o)]
The deadline for entities on a calendar to file if they are offering such a program in 2017 under the law is March 13, 2017.
The IRS, in issuing the notice, notes:
Treasury and the Internal Revenue Service (IRS) understand that some eligible employers may find it difficult to comply with the written notice requirement absent additional guidance concerning the contents of the notice. Treasury and IRS intend to issue that guidance in the near future.
Because of this the IRS is granting the following relief:
In order to provide eligible employers additional time to furnish the initial required written notice to eligible employees following the issuance of such guidance, an eligible employer that provides a QSEHRA to its eligible employees for a year beginning in 2017 is not required to furnish the initial written notice to those employees until after further guidance has been issued by Treasury and the IRS. That further guidance will specify a deadline for providing the initial written notice that is no earlier than 90 days following the issuance of that guidance.1 No section 6652(o) penalties will be imposed for failure to provide the initial written notice before the extended deadline specified in that guidance.
The notice also grants relief to those employers who may, being aware of the impending deadline, have already issued a notice to employees. The IRS states:
Employers that furnish the QSEHRA notice to their eligible employees before further guidance is issued may rely upon a reasonable good faith interpretation of the statute to determine the contents of the notice.