While there were many attempts in 2017 to repeal and replace the Affordable Care Act (“ACA”), also known as “Obamacare,” those attempts were mainly unsuccessful. As part of their tax reform bill, the GOP was able to repeal the Individual Mandate of the ACA, but the Employer Mandate, subsidies, exchanges and reporting obligations remain in place.
In November, the IRS starting mailing out Letter 226-J to companies, which enforces penalties on employers for not adhering to the regulations under the ACA’s Employer Mandate. The Employer Mandate is the provision in the ACA legislation that requires Applicable Large Employers (“ALEs”), companies with 50 or more full-time or full-time equivalent employees, to offer their full-time workforce affordable, minimum value health insurance or be penalized.
The reporting requirement began 2015. However, since the law was new and complex, the IRS had extended the deadlines for mailing and filing forms, as well as delaying the enforcement of penalties. The penalties can be costly to a company generally charging $2000 per employee (excluding the first 30 employees) if they do not offer qualifying health insurance. Penalties can be triggered when an employee purchases insurance through the Marketplace and receives a subsidy for it. According to the IRS, if your company receives a penalty notice and you disagree with their findings, you have 30 days to file a dispute through Form 14764. Some of the notices were issued due to forms being filled out incorrectly. However, if the employer can provide proof that they did offer qualifying health insurance for at least 70% of their full-time employees (for tax year 2015), they can have the penalty waived (note that the threshold is now 95%). Once your Form 14764 has been received by the IRS, they will confirm receipt by sending one of five versions of letter 227 that acknowledges the ALE’s response and informing them if any further action is necessary.
The IRS is working through the 2015 filings. They are expected to soon begin auditing and assessing penalties for the 2016 tax year. To avoid the possibility of large penalties related to ACA requirements, it is always recommended to find a quality ACA service provider who can assist your entity with mailing and filing forms accurately and on time.