IRS Announces There is No Statute of Limitation on ACA Penalties for ALEs

Many businesses are trying to reopen and bring back their workers following the shelter-in-home orders due to COVID-19. For companies that are Applicable Large Employers ("ALEs"), with 50 or more full-time employees or 50 or more full-time equivalent employees, they need to make sure they are compliant with ACA requirements to avoid the possible exposure to penalties. The IRS released a memorandum this year stating that there is no statute of limitation on the Employer Shared Responsibility Payment imposed by Section IRC § 4980H. The reasoning behind this, as stated in the memo, is because there is no tax return filed to report an employer’s liability for the ESRP.

According to Section IRC § 4980H, there are two possible penalties.  One is assessable when an ALE fails to offer its full-time employees (“FTEs”) essential minimum coverage, and the other is assessable if the ALE offers essential minimum coverage to their full-time employees, but the rate is not affordable to them under the ACA guidelines. The ESRP penalty can be triggered if one of its full-time employees receives a tax credit to purchase coverage from the Health Insurance Marketplace.

The penalty for 2020 is $2,579, up from $2000, per full-time employee, excluding the first 30 employees. The Patient Protection and Affordable Care Act require ALEs to report to the IRS their offer of health insurance to FTEs beginning in 2015. Seeing as there is no statute of limitations, companies should take time to be sure they are complying with the ACA Employer Mandate to avoid costly penalties.

Now as businesses are reopening, they should take the time to review their records and check they are compliant. Companies are advised to keep records of all offers of coverage and make sure they are meeting certain minimum value and affordability standards. To learn more about ACA compliance, click here.  We are here to help! Please contact SPS/GZ with any questions you may have about ACA reporting.

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