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ACA Employer Responsibility: Subsidy Notices and Appeals

The information reporting period of the Affordable Care Act (ACA) has passed, but many businesses are still confused about what happens next. Though the chances of an IRS audit remain relatively small this year, it’s always a good idea to adopt a defensive strategy to avoid any potential audit penalties.

Engage provides ACA compliance and reporting assistance to clients who offer Engage health plans to their worksite employees.  We also advise all of our clients to proactively review their ACA compliance procedures. Looking back on your ACA compliance steps will help flag any potential gaps and improve your processes going forward (such as record-keeping or employee classifications).

Here’s a checklist of recommended ACA compliance review actions:

  • Document common ownership and control group affiliations (if applicable) as part of your annual Applicable Large Employer (ALE) testing (An ALE has 50 or more full-time employees or full-time equivalents)

  • Maintain a copy of your formal benefit plan document(s) 1

  • Create a statement of the plan’s measurement, administrative and stability periods (initial and ongoing) 1

  • Document the annual affordability safe harbor method used and premium/employee contribution calculations 1

  • Define and identify how employees are classified (full-time, part-time, variable and seasonal if applicable) 1

  • Record supporting eligibility determination including hours tracking and calculations for all employees 1

  • Maintain a copy of employee communications regarding eligibility/offers of coverage, as well as any electronic or signed waivers of coverage 1

  • Document fulfilment of all tax reporting requirements (1094/1095 distribution)1

Note: The deadline for sending Form 1095 to employees and 1094 to the IRS for 2016 has passed. Few things are certain but chances are that some of the forms contain some errors. The government has indicated it will not assess penalties if the employer made a “good-faith attempt to comply.” This means that if you distributed the forms and submitted them to the government by the due date, a good faith effort was made and a 1094/1095 IRS penalty will not be applicable.

1 This is an employer responsibility. Engage provides assistance with this and other ACA requirements on behalf of clients offering Engage health benefit programs to their worksite employees.

IRS Notices Regarding ACA Penalties

Subsidies, also known as Advanced Premium Tax Credits, are the trigger for employer penalties, so it’s important to respond to any subsidy notifications from the IRS correctly – and promptly.

Remember, if an employee obtained coverage on a federal exchange and indicated that you (their employer) failed to provide “affordable minimum value coverage,” that employee may have received a tax credit.  This could present a risk to you as an Applicable Large Employer, even if the information provided to the government by your employee was inaccurate.

What do you do if you receive a notice?

Employers only have 90 days from the date of the notice to appeal using the Marketplace Employer Appeal Request Form.  Employes should respond well within that period and also notifiy the employee. If the employer fails to respond, the Marketplace will notify the IRS and the employer may face penalties of $270/month for each full-time employee who enrolled through a public exchange and qualified for a tax subsidy.   

When notifying an employee, keep in mind that an employer cannot terminate or otherwise discriminate against an employee who enrolled and received a subsidy, whether in error or not.

This is new territory for all employers, which is why many companies are turning to ACA-compliance advisors like Engage to help them manage the bulk of their ACA reporting tasks throughout the year to avoid the potential for costly penalties.