All the political upheaval surrounding healthcare over the past few years has left many feeling confused about the status of the Patient Protection and Affordable Care Act, also known as “Obamacare.” But, while there have been some recent changes to the law, many employers are still required to provide health insurance to their employees in 2019. Employers who fail to comply with this requirement or who failed to do so in the past will still be on the hook for penalties.
The Bad News
The Tax Cuts and Jobs Act passed in 2017 eliminated the individual mandate for health insurance, but the updated law did not change the mandate for employers.
With the employer mandate, the ACA requires businesses with more than 50 employees to provide affordable health insurance for their employees. If a business fails to do so, they face steep penalties from the IRS. These penalties actually went up for the 2019 tax year, and employers will have to pay $2,500 per employee for offering no coverage and $3,750 per employee who receives a premium tax credit through a healthcare exchange.
The IRS has been very adamant that they will not issue waivers for employer mandate penalties. Employers who failed to comply with the health insurance mandate in 2015 and 2016 have already received their 226J penalty letters from the IRS, and there is no reason to expect that will change for 2017 and beyond.
The Good News
The 226J Letter isn’t a final determination. It’s possible to appeal the IRS’s decision if proper coverage was offered to employees. Because the IRS assesses the penalty based on the information provided on Forms 1094-C and 1095-C, as well as information provided by individuals during their Healthcare.gov enrollment, errors in these processes could trigger a false violation.
For example, a person may receive the premium tax credit for their Marketplace coverage, even though they were offered affordable coverage from their employer. This can happen when an employee completes an application for Marketplace coverage and says they were not offered health insurance by their employer even when they were. While enrollees are sometimes asked for supporting documentation with their applications, some people may just have been granted a premium tax credit. The IRS may also assess a penalty because of errors on Forms 1095-C and 1094-C.
When an employer is assessed a penalty in error, the employer has 30 days to respond to the letter and prove that they did comply with the employer mandate.
Even Better News
LBMC Employment Partners can assist with the IRS Letter 226J. We can help identify any corrections or transition relief not taken, gather the necessary documents, and draft a thorough response to the IRS. We can also help get employers on track with their future ACA compliance. Contact us today to learn more!