The time has come, the IRS has stated that they are going to begin enforcement of the Affordable Care Act’s (ACA) employer mandate penalties as soon as the end of this year. During the tax years 2015 and 2016, the Employer Shared Responsibility law was seen as ‘’practice’’ by the IRS and no penalties were imposed as long as employers could prove that they made a good faith effort to comply with the law. That is changing. According to the IRS’s recently updated Questions and Answers on Employer Shared Responsibility Provision Under the Affordable Care Act (FAQs 55-58), the IRS plans to issue notices for assessment of penalties in “late 2017” to Applicable Large Employers (ALEs) based on the 2015 calendar year.
This notice will come in the form of a letter (Letter 226J), and the determination of whether an ALE may be liable for the Employer Shared Responsibility Payment (ESRP) will be made based, in part, on the ALE’s reporting on IRS Forms 1094-C and 1095-C and whether or not one of the ALE’s full-time employees identified on Form 1095-C was allowed the Premium Tax Credit (PTC) on his or her individual income tax. It’s important to note that in 2015, only employers with 100 full-time employee equivalents were considered ALEs.
There are two specific reasons why the ALE may owe the ESRP.
- The ALE did not offer “minimum essential coverage” (MEC) to at least 70% of the full-time employees and one full-time employee bought insurance on the Marketplace and qualified for a subsidy.
- The ALE did offer MEC but the coverage was not “affordable” or did not provide “minimum value”.
The procedures for proposing and assessing the ESRP are outlined below:
The IRS will send Letter 226J which will state a preliminary calculation of the ESRP. The ALE will have 30 days from the date on the letter to respond. If the ALE does not respond within 30 days, the IRS will assess the amount of the proposed penalty in Notice CP 220J. If the ALE does not agree with the assessment, they will have a chance to respond to Letter 226J before an ESRP is assessed. If the ALE responds to Letter 226J, the IRS will respond with Letter 227 which will detail further action steps that the ALE will need to take in order to appeal the IRS decision. If the ALE agrees with the ESRP penalty, the ALE will complete Form 14764 and include payment for the penalty.
It is widely known that the IRS had electronic filing issues with the 2015 Forms, so the assessment letter will often be inaccurate due to IRS error and must be carefully reviewed and considered before remitting payment.
For our 2015 clients, BASIC will help you through this process at no cost as detailed below:
- BASIC will review Letter 226J and provide an electronic copy of the Forms 1094-C and 1095-C filed with the IRS (if needed).
- BASIC will review the Forms 1094-C and 1095-C prepared by BASIC and compare them to the information supplied by the ALE to BASIC to determine if the data was filed correctly.
- BASIC will help determine if the ALE does or does not owe an ESRP based on the information submitted to us for preparation of the Forms 1094-C and 1095-C.
- BASIC will generate the response letter for the ALE to submit to the IRS if BASIC was responsible due to an error or omission in reporting.
Not a BASIC client in 2015? Fear not, BASIC can still help for a nominal fee.
Looking ahead, don’t miss the important deadlines coming up. The Deadlines for tax year 2017 are:
- January 31, 2018: submitted to employees: Forms 1095-B and 1095-C
- Submitted to the IRS by paper: February 28, 2018: Forms 1094-B and 1094-C with copies of 1095-B and 1095-C
- Submitted electronically: March 31, 2018: Forms 1094-B and 1094-C with copies of 1095-B and 1095-C.
- Employers are also required to implement provisions that ban discrimination by any self-funded plan receiving federal financial assistance or is administered by an executive agency, beginning Jan 1, 2017.
Do not delay, become compliant with the ACA now! We provide our clients with assurance by allowing them to transfer the liability of the 6055/6056 filing to BASIC. We also provide each client with a designated and experienced compliance account manager. Employers can rest easy while BASIC protects them from fines and penalties. Trust the experts, and keep it BASIC.
BASIC offers both full ACA administration (ACA Elevate) and self-admin solutions (ACA Transact)