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Buried in the budget law signed by the President last December is the Expatriate Health Coverage Clarification Act of 2014. Known as EHCCA, this act exempts some expat coverage from several thorny Affordable Care Act-related requirements, and treats the coverage as adequate for both the individual and employer mandates, but only if the coverage meets several specific and potentially difficult requirements. The new rules and their potential accommodations apply to insurance contracts issued or renewed on or after July 1, 2015. (For more information, please see an earlier blog post.)

On the cusp of the law’s effective date, the IRS issued a notice indicating insurers and employers will be given more time to bring their expat plans into compliance with the new law. Until such time as the regulatory agencies (the IRS, Department of Labor and Health and Human Services) issue proposed regulations, the agencies will allow insurers and employers to use a reasonable good faith interpretation of the law.

Importantly, the reasonable good faith standard does not apply to:
• ACA tax reporting requirements (the so-called “Section 6055/6056 reporting rules” will apply to expat coverage beginning in calendar year 2015). However, the new law allows the IRS tax forms to be supplied electronically to the enrollee (expat) without consent, unless the enrollee explicitly refuses electronic delivery. In contrast, the standard ACA reporting rules only allow for electronic delivery to the employee if the recipient affirmatively consents.
• PCORI fee payment. Until further notice, the IRS has indicated that the PCORI fee won’t apply if the plan or policy is designed and issued specifically to cover primarily employees a) who are working and residing outside the United States, or b) who are not citizens or residents of the United States but who are assigned to work in the United States for a specific and temporary purpose or who work in the United States for no more than six months of the policy year or plan year.

The latest IRS notice applies to insurance contracts issued or renewed on or after July 1, 2015. The IRS also invites comments on the new law in advance of the agencies’ issuance of proposed regulations.