Beginning as soon at the end of 2017, the IRS has stated that they are going to begin enforcement of the Affordable Care Act’s (ACA) employer mandate penalties. The ACA is still the law of the land and the IRS is obligated to enforce this law. 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. 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 IRS has outlined their procedures for proposing and assessing the ESRP.
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 and 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.
For our 2015 clients, BASIC will help you through this process at no cost.
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. BASIC will help you sort through your 2015 reporting information 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.
Please contact BASIC’s Compliance Department at firstname.lastname@example.org for further information or questions!
*Nominal fees will apply for clients who are were not BASIC ACA clients in 2015