Let ’ s consider two examples : Example # 1 – Canadian secondment to US The employee remains an employee of CANco but is seconded to an affiliated USco for three years to avoid the possibility of having CANco create a permanent establishment in the US . The secondment agreement , by its nature , gives USco the right to control the employment services while the employee works in the US . On arrival in the US , the employee becomes a US resident and begins participating in an employer-sponsored health-care plan . Prior to beginning the assignment , the employee is not subject to the individual mandate . However , once the assignment begins , the employee is required to maintain health-care coverage for their family ; as such , the coverage provided by USco is considered MEC . USco is required to offer the employee affordable health-care coverage and must issue a statement to the employee 5 that reports the coverage for the employee and their family . In addition , USco is required to file Form 1095-C for each fulltime employee and Form 1094-C with the IRS — both on an annual basis .
Example # 2 – Employee works in the US for CANco CANco secures a contract in the US and relocates employees there to service the contract for a two-year period . On arrival in the US , the employees become US residents . During their foreign assignment , the employees are covered under a private health-care plan that is sponsored by CANco and provided by a Canadian insurance company . Prior to beginning the assignment , the employees are not subject to the individual mandate . However , once the assignment begins , the employees are required to maintain health-care coverage for their families , and , as such , the coverage provided by CANco is considered MEC as long as the requirements of acceptable health-care coverage are satisfied . If CANco sends more than 50 employees to the US , it is required to offer each employee affordable health-care coverage and must issue a statement to each one 6 that reports the coverage for the employee and their family . In addition , CANco is required to file Form 1095-C for each full-time employee and Form 1094-C with the IRS — both on an annual basis . By contrast , if fewer than 50 employees were sent to the US , CANco would not be considered a large employer and would not be subject to the employer mandate . It is also worth noting that if the employees are considered non-resident for US tax purposes , neither the individual mandate nor the employer mandate would apply . 7
A final note Employers that offer tax-equalization programs may face an increased cost due to the fact that penalties for the individual mandate are paid through an individual ’ s US tax return and treated as an assignment-related cost .
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5
This is usually done by furnishing a copy of the 1095-C form provided to the IRS .
6
Again , this is usually done by furnishing a copy of the 1095-C form provided to the IRS .
7
Code of Federal Regulations , Title 26 ( Internal Revenue ), Chapter I , Subchapter A , Part 1 , Section 1.5000A-3 ( c )( 2 ).
36 CPABC in Focus • Sept / Oct 2016