ACA Noncompliance Penalties
This post is for Applicable Large Employers (ALEs) required to comply with the Affordable Care Act. The following is sourced from the ACA Times, and we hope you find it useful.
Various ACA penalties may be issued due to non-compliance or missing/inaccurate data submitted to the IRS when filing.
If you are overwhelmed by ACA reporting and compliance, our IRS-certified ACA Software or ACA Full Service can help make filing and tracking employee data easy.
Letter 5005-A is issued to ALEs that failed to furnish 1095-C forms to employees or file forms 1094-C and 1095-C with the IRS for the 2017 tax year by the required deadlines.
The IRS cross-references the number of W-2’s filed with ACA filing data and issues the letter accordingly.
This penalty notice follows the IRS’ Letter 5699, which is sent to ALEs that failed to file and/or furnish the required ACA forms 1094-C and 1095-C.
In Letter 5699, the IRS asks employers to confirm the name they used for ACA filing, their Employer Identification Number, and the filing date.
Letter 5699 allows employers to provide proof they were not an ALE during the filing year, or if they had a valid reason not to file. This letter also may request that ALEs submit missing forms 1094-C and 1095-C.
If the IRS believes an ALE failed to comply with the ACA Employer Mandate, they will issue Letter 226J.
From irs.gov: “Letter 226-J is the initial letter issued to Applicable Large Employers (ALEs) to notify them that they may be liable for an Employer Shared Responsibility Payment (ESRP). The determination of whether an ALE may be liable for an ESRP and the amount of the proposed ESRP in Letter 226-J are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.”
Letter 226J is a notification sent to companies the IRS believes have not offered the appropriate health care coverage to eligible employees (or dependents).
According to the IRS, “If you disagree with the proposed ESRP liability, you must provide a full explanation of your disagreement and/or indicate changes needed…Return all documents as instructed in the letter by the response date.”
Section 4980H Penalties
Two separate penalties can apply under the Employer Shared Responsibility Rules: The Section 4980H(a) penalty and the Section 4980H(b) penalty.
According to the IRS, “Under the Affordable Care Act’s Employer Shared Responsibility Provisions, ALEs must either offer minimum essential coverage that is ‘affordable’ and that provides ‘minimum value’ to their full-time employees (and their dependents), or potentially make an Employer Shared Responsibility Payment to the IRS…
Even if an ALE member offers minimum essential coverage to at least 95 percent of its full-time employees (and their dependents), it may owe the second type of Employer Shared Responsibility Payment for each full-time employee who receives the premium tax credit for purchasing coverage through the Marketplace.
In general, a full-time employee could receive the premium tax credit if: (1) the minimum essential coverage the employer offers to the employee is not affordable; (2) the minimum essential coverage the employer offers to the employee does not provide minimum value; or (3) the employee is not one of the at least 95 percent of full-time employees offered minimum essential coverage.”
The Section 4980H(a) penalty may apply when an ALE does not offer minimum essential coverage to 95% of full-time employees (and dependents).
The Section 4980H(b) penalty may apply when an ALE does not offer affordable or minimum value coverage.
Penalty Relief Consultation
Passport Software provides penalty relief consultation services, and we’ve helped many companies avoid or drastically reduce ACA penalties.
If you receive a letter from the IRS requesting that you correct missing/inaccurate filing information, or if you are notified of a potential penalty, it might be wise to reach out to an ACA compliance expert.
Our expert customer service is friendly and knowledgeable, and our pricing is affordable. To learn more about our ACA Software, ACA Full Service or penalty relief consultation services, call 800-969-7900. Or, contact us – we are here to help.