Many companies have completed their Section 6055 and 6056 information reporting under the Affordable Care Act (ACA), but their work and worries are not over.There's still a good deal of confusion among employers and concerns about possible penalties or audits by the IRS.
ACA Reporting: Considerations and Next Steps for Employers:
Review your ACA-compliance activities
Employers should look back at the steps taken to get into compliance and document evidence of their efforts.Though the chances of an IRS audit are relatively slim this year, it's best to adopt a defensive strategy to avoid any potential penalties. Looking back will help flag potential weaknesses in your processes, minimize any gaps in documentation and make it easier for employers to make changes if gaps are identified.
Employers can use the following checklist to document specific details and decisions:
Document common ownership and control group affiliations (if applicable) as part of your annual applicable large employer (ALE) testing
Maintain a copy of your formal benefit plan document(s)
Create a statement of the plan’s measurement, administrative and stability periods (initial and ongoing)
Document the annual affordability safe harbor method used and premium/employee contribution calculations
Define and identify how employees are classified (full-time, part-time, variable and seasonal, if applicable)
Record supporting eligibility determination including hours tracking and calculations for all employees
Maintain a copy of employee communications regarding eligibility/offers of coverage (as well as any electronic or signed waivers of coverage)
Document completion of all tax reporting requirements (e.g., 1094/1095 distribution)
1 The deadline for sending out the IRS 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 errors. Keep in mind that the government has indicated it will not assess penalties if the employer made a good-faith attempt to comply. This means that if an employer at least distributed the forms and submitted them to the government by the due date, a good faith effort has been made and a 1094/1095 IRS penalty will not be applicable.
Watch for notice letters from the IRS regarding ACA penalties
According to the Centers for Medicare and Medicaid Services (CMS), the federal Marketplace’s Employee Notice Program will be sending notifications (beginning in late June) to employers whose employees received premium subsidies when purchasing health insurance on the Marketplace. It’s important to note that if an individual attested (at the time of his/her enrollment) that their employer failed to provide affordable minimum value coverage, that employee may have received coverage subsidies based on those statements, whether accurate or not. This could present a risk to the employer as an ALE.
So what does an employer do if they provided ACA-compliant coverage but still received a notice?
There are two steps to take, promptly:
1. Appeal to the U.S.. Department of Health and Human Services (HHS);
2. Notify the employee.
Employers only have 90 days from the date of the notice to appeal any adverse determination using the Marketplace Employer Appeal Request Form. If the employer doesn't respond to the notice, the Marketplace will notify the IRS and the company may face penalties of $270/month2 (in 2016) for each full-time employee who enrolled through a public exchange and qualified for a tax subsidy.
2 Only the IRS can determine whether an applicable large employer is subject to a penalty under Section 4980H(a) or (b) for not providing ACA-compliant coverage.
Employers should carefully consider how to proceed in light of the ACA retaliation rules, which state that a company cannot “discharge or in any manner discriminate against any employee with respect to his or her compensation, terms, conditions or other privileges of employment because the employee (or an individual acting at the request of the employee) has received a credit under the ACA or reported any violation of, or any act or omission the employee reasonably believes to be a violation of the ACA.” What this means is that a company may not terminate or otherwise discriminate against an employee that enrolled and received a subsidy whether in error or not.
The bottom line:
A response to any IRS notice letter should be handled carefully. ACA compliance notices are no different.This is new territory for employers, which is why many companies are turning to ACA-compliance counselors like those at Engage PEO to manage the bulk of their ACA reporting tasks throughout the year and plan accordingly to avoid potential penalties.