The IRS recently revised the Q&As on Employer Shared Responsibility Provisions under the Affordable Care Act (ACA) on its website to announce that in “late 2017” it will begin to notify employers of their potential liability for the 2015 calendar year. Employers that filed IRS Forms 1094-C and 1095-C for 2015 need to be alert and ready to respond.
The IRS will use a form of letter designated “Letter 226J”. That 8-page letter gives an estimated amount owed in the first paragraph and will include a summary table showing by month the payments the IRS believes the employer owes. The letter provides directions on the employer actions either to comply with the potential liability or to contest it. Generally, the employer will have 30 days from the date of the letter to take action, but accounting for IRS administrative delay and the US mail, employers may not actually have 30 days to respond. Employers who disagree with the IRS analysis of ACA liability have a process to request a pre-assessment conference.
As a reminder, the Employer Shared Responsibility assessments arise from two ACA provisions requiring applicable large employers, to avoid penalties, to (A) offer minimum essential coverage to at least 95% of all full-time employees, and (B) to ensure that such offer is affordable and provides minimum value. For 2015, the annual penalty for violating (A) above is $2080 per full-time employee (less the first 30 full-time employees). The annual penalty for violating (B) above is $3120 per full-time employee who receives a subsidy or who purchases coverage on the ACA Marketplace and receives a premium tax credit.
As year-end approaches and the volume of mail increases, employers should remind their mailrooms, HR Departments and others in the workforce to be alert to mail from the IRS and to send such mail to a designated individual.
Employers will also need to be prepared to analyze the proposed assessment in IRS Letter 226J with the assistance of payroll, any service provider that prepared the Forms 1094-C and 1095-C, and legal counsel.