Recent actions by the IRS indicate that it’s about to take action regarding ACA mandate penalties. For months business owners have speculated about the ACA and employer responsibility within it, and how stringently the Internal Revenue Service would enforce it. The agency recently updated its Q and A for shared responsibilities among employers, and has revealed that mandate penalties for employers will be enforced and showcased within the 226J letter. Whether or not an employer is held liable is dependent primarily on the data which the employer submitted to the IRS previously. Below is the most important things business owners need to be aware of.
The 226J Letter
The IRS begin issuing this letter in late 2017, for the calendar year 2015. It includes a summary table for the ESRP or employer shared responsibility payments, which itemizes proposed monthly payments and shows the liability for IRC section 4980H (b) or 4980H (a) for every month if applicable. An explanation of the 4980H is also provided, along with the Form 14765 (PTC employee list). This list determines the number of full time workers who for a minimum of thirty days out of the year were allowed premium tax credits which did not qualify for affordability harbor or relief, and instructions for what the ALE (Applicable Large Employers) should do if they disagree with the ESRP proposal and the actions which will be taken by the IRS should the ALE not respond to the letter in a timely manner.
The ALE will typically have approximately thirty days to respond to the 226J letter prior to the ESRP being addressed formally and demands for payment to be given to the IRS. The letter provides the ALE with an opportunity to provide statements and documentation which supports their position and why they are in disagreement with the ESRP. It can include suggested changes that the employer would prefer to make regarding info previously reported on the 1094 or 1095 forms.
Forms 1095-C and 1094-C
Each employer should have a copy of the 1095-C and 1094-C forms which were submitted to the IRS for the 2015 calendar year. These letters are important when receiving and responding to the 226J letter, as they contain important information related to employer compliance in conjunction with the 4980 forms. The IRS has noted in the 226J letter that applicable large employers should not submit the 1094-C and 1095-C a second time, but should follow the steps highlighted in the 226J letter to handle any incorrect data that was previously submitted in these forms.
The thirty day response time means that employers have no room for mistakes or errors. As such they should speak with their administrative staff members and inform them that any notifications which have been received by the IRS must immediately be forwarded to a contact within the department of benefits.