ACA penalty letters are on the way… Are you prepared?
According to the Affordable Care Act (ACA) regulations, applicable large employers (ALEs) must offer their full-time employees minimum essential health coverage that is affordable and meets minimum value. If an ALE fails to offer adequate coverage to an eligible employee, and one or more eligible employees receives a premium tax credit from the ACA Health Insurance Marketplace, the ALE may be subject to an employer shared responsibility payment.
To date, the IRS has not assessed any penalties, even though the ACA’s employer shared responsibility provisions have been in effect since tax year 2015. Prior to the guidance published to the IRS website last week, no formal assessment or collection process existed. This is the first official guidance on how ACA penalties will be communicated to employers.
The guidance adds: “The IRS plans to issue Letter 226J to an ALE if it determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee).” The IRS states that it plans to issue Letter 226J for the 2015 reporting year “in late 2017”.
Upon receiving Letter 226J, employers will have the opportunity to respond. The letter will provide instructions on how an employer may acknowledge the employer shared responsibility payment or dispute liability for the payment (employer responses are typically due back to IRS within 30 days from the date of the letter).
As in past communications, we continue to encourage employers to maintain procedures and proper staff training in the event of receiving notices from the IRS – and to be timely in reaching out to your professional resources.
Please contact our credentialed team should you need assistance.