Mid-Atlantic Health Law TOPICS

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ACA Penalty Letters

Many employers, including health care providers, have been notified that the IRS has determined that the employers have failed to satisfy the employer shared responsibility requirements under the Affordable Care Act (ACA) for 2015 and/or 2016.

A.  Shared Responsibility Payments

An employer’s failure to satisfy the employer shared responsibility requirements under the Affordable Care Act can result in the employer being assessed with either an “A” penalty or a “B” penalty.

An employer is liable for the “A” penalty if the employer does not offer “minimum essential coverage” to at least 95% (70% in 2015) of its “ACA full-time employees” (and their children under 26), and if any ACA full-time employee buys coverage through a state health insurance exchange and receives a premium tax credit. Under the “A” penalty, the employer must pay $167 per month (indexed for inflation) times the number of its ACA full-time employees minus 30 (minus 80 in 2015).

An employer is liable for the “B” penalty for all ACA full-time employees for whom coverage is (i) not offered, (ii) is not “affordable,” or (iii) does not provide “minimum value.” The “B” penalty applies to each ACA full-time employee who buys coverage through a state health insurance exchange and receives a premium tax credit. Under the “B” penalty, the employer must pay $250 per month (indexed for inflation) for each such employee.

B.  Employer Response

The IRS has provided specific instructions regarding how an employer can respond if it wants to challenge the proposed penalty. In many cases, the determination of ACA non-compliance has been due to errors in how the employer completed IRS Form 1094-C (which transmits information on employer-provided health insurance offers and coverage). The IRS has been willing to waive proposed penalties upon timely receipt of corrected information. 

Notably, the IRS provides only 30 days from the date of the initial letter for employers to respond before the IRS issues a Notice and Demand for payment. Therefore, it is important that an employer who receives an ACA penalty letter should attend to it promptly, including contacting an attorney with applicable experience to help with the response.

 

Mary L. Porter
410-576-4003 • mporter@gfrlaw.com