IRS Poised to Begin Employer Mandate Enforcement

IRS Poised to Begin Employer Mandate Enforcement

By the end of 2017, the Internal Revenue Service (IRS) will begin enforcing the Patient Protection and Affordable Care Act’s (ACA) mandate that applicable large employers (ALEs) offer health insurance coverage to employees and dependents or pay a fine.  The Trump Administration recently released new guidance (frequently asked questions #55-58) that makes it clear that the IRS will begin with enforcement of the employer mandate for the 2015 tax year.  The IRS will use both data reported to the IRS on Forms 1094-C and 1095-C and information from the health insurance exchanges to establish if an employer has penalty liability.

While it is unknown at this time exactly how many employers could owe employer mandate penalties for 2015, early estimates are that tens of thousands of ALEs may be affected by IRS enforcement efforts in the next few months.  Even businesses that were fully compliant with the employer mandate may receive communications from the IRS.  Since the health insurance exchanges did not always aggressively screen individual applicants to determine if they had already been offered qualified employer coverage, it is entirely possible that an employee could have received a coverage subsidy and triggered an errant penalty notice for their employer.  However, just receipt of a notice from the IRS does not mean the employer automatically will have to pay the penalty; there will be a chance for every employer to appeal.

If the IRS believes an employer has potential liability for an employer shared responsibility payment for the tax year 2015, then they will send the employer Letter 226J in late 2017. If your company receives a letter, please contact your Kistler Tiffany Benefits Consultant right away, so that we can review it with you and help you gather the appropriate documentation that you may need to respond to the IRS.

If an employer disagrees with all or a part of the proposed penalty outlined by the IRS, then Letter 226J will include instructions to respond in writing within a specified period.  All employers that reply to the IRS objecting to their proposed assessment in a timely fashion will receive a written response back from the IRS describing further actions the ALE may need to take.  If the employer still disagrees, then the ALE may request a pre-assessment conference with the IRS Office of Appeals.  If an employer does not respond in writing to Letter 226J, then the IRS will follow-up with a written demand for payment, Notice CP 220J.

Finally, it is essential to keep in mind that Letter 2267J will just address potential employer penalties for not offering health insurance coverage, or not offering coverage that meets the ACA’s minimum value and/or affordability of coverage standards. Enforcement of the related employer reporting requirements (mistakes on Forms 1094-C and 1095-C, failing to file Forms 1094-C and 1095-C or filing those forms late) is a different matter. When the IRS plans to start employer reporting requirement enforcement is still unknown.

By Jessica Waltman, Special Contributor

Jessica Waltman is a health reform strategist, with more than 20 years of experience in health insurance markets and health policy. She is the former Senior Vice President, Government Affairs, for the National Association of Health Underwriters.