8886 / Was there any transition relief for individuals with respect to the shared responsibility penalty provisions effective in 2014?

Editor's Note: The shared responsibility penalty was reduced to zero for tax years beginning after 2018.

Yes. If an individual is eligible to enroll in an employer-sponsored health plan that has adopted a plan year that is not a calendar year, the individual is eligible for transition relief from the shared responsibility penalty if the plan year began in 2013 and ended in 2014. The transition relief began in January 2014 and continued through the month in which the plan year ended.¹ This rule was particularly important because many employer-sponsored health plans do not allow an employee to enroll in a plan after the beginning of the plan year. In the case of a 2013-2014 non-calendar year health plan, eligible employees would not be permitted to obtain the employer-sponsored coverage until after the start of 2014, when the shared responsibility penalty provision had already become effective. The transition relief prevented these taxpayers from becoming liable for the shared responsibility provision until the next plan year began in 2014.

The IRS also provided relief for taxpayers who are covered under certain limited-benefit government-sponsored health plans which may not provide minimum essential coverage (examples of this type of coverage include optional family planning coverage and pregnancy-related services that are offered through Medicaid). This transition relief applied to months in 2014 in which an individual was covered by one of the specifically enumerated plans that did not provide minimum essential coverage.²