The Internal Revenue Service has issued final regulations for the shared responsibility payment for not maintaining minimum essential coverage under the Affordable Care Act, also known as the individual mandate.

The final regulations largely finalize the rules in a notice of proposed rulemaking that was published in February. The individual mandate differs from the employer mandate, which was delayed last month until January 2015 (see Obama Administration Delays Employer Mandate for Affordable Care Act).

The individual mandate in contrast is still scheduled to take effect in 2014, when individuals who choose not to enroll in a health insurance program will have to pay a penalty of $95 per person per year, or 1 percent of their income, whichever is larger. The penalty will gradually increase in 2015 to $325, or 2 percent of income, and in 2016 to $695, or 2.5 percent of income, whichever is bigger.

There were several changes from the proposed regulations. The Treasury Department and the IRS received comments asking whether medical coverage offered to employees by an organization acting on behalf of an employer qualifies as an eligible employer-sponsored plan. For example, commentators asked whether a multiemployer plan or a single-employer collectively bargained plan, such as a union-sponsored health plan, is an eligible employer-sponsored plan for the employees covered by the collective bargaining arrangement and eligible to participate in the plan.

In addition, commentators asked whether a plan offered to an employer’s employees by a third party, such as a professional employer organization or leasing company, is an eligible employer-sponsored plan for the employees eligible to participate in the plan. The final regulations are revised to provide that a plan offered by an employer to an employee includes a plan offered to an employee on behalf of an employer. No inference is intended from this treatment that the third party is the employer for this or any other provision of the Code or related laws.

The Defense Department’s Nonappropriated Fund Health Benefits Program also now qualifies as a government-sponsored program and an eligible employer-sponsored plan that meets the definition of minimum essential coverage. The Treasury Department and the IRS are considering whether other government-sponsored programs qualify as eligible employer-sponsored plans.

The preamble to the proposed regulations explains that a self-insured group health plan is an eligible employer-sponsored plan. Several commentators requested additional clarification concerning the treatment of a self-insured group health plan because these plans are not offered in a large or small group market within a state. The rule in the proposed regulations is revised to clarify that a self-insured group health plan is an eligible employer-sponsored plan, regardless of whether the plan could be offered in the large or small group market in a state.