ACA Penalties for 2015 Have Arrived
It took a while, but the Internal Revenue Service (IRS) is actively sending invoices to collect taxes from employers from the 2015 filing. We are hearing about non-Tango Health customers getting notified about ACA penalties directly based on information that employers provided to the IRS during the 2015 1095-C and 1094-C tax form filing season.
If you have received IRS letter 226J with a discussion about ESRP (Employee Shared Responsibility Payment), then the IRS has identified your company or your EIN as out of compliance to the ACA laws and is asking for payment. Within the IRS letter 226J, it will call out two laws, both with an aggressive multiplier impact even in circumstances where just a one person for one month was out of compliance:
- Non-compliance to offering MEC (Minimum Essential Coverage) at the 2015 level of 70% and an employee took a PTC (Premium Tax Credit) in 2015. (The IRS increased this threshold to 95% in 2016 and later years.)
- Non-compliance to affordable coverage laws or minimum value laws and an employee took the PTC in 2015.
- NOTE: For more info on these laws, see IRS regulations 4980H section “About the ESRP”, and then Form 14764 and 14765. This is a good starter link for the deep dive on understanding these complex regulations with huge fine/penalty/tax implications: https://www.irs.gov/individuals/understanding-your-letter-226-j
Be forewarned, these fines/penalties can be huge and very alarming. According to the existing laws it can take just one person, just one month, yes just one person just one month, out of compliance to the 2015 threshold of 70% and the fine is multiplied by everyone in the EIN. So large companies with large EINs need to be especially aware around 2016, 2017, and 2018 since the threshold only allows for 5% of the full-time employees to be out of compliance.
Here at Tango Health we are very proactive around ensuring are customers are compliant with the ACA. We receive and review customer data every month, flag potential ACA compliance issues and communicate what we find with our customers. If your ACA service provider is not performing a monthly data review, then your company could be exposing itself to some very large monthly fines from the IRS.
CFOs will be in shock at some of the penalties. In one example, a sister company of one of our customers revealed that they did not know their ACA provider incorrectly reported that one of their EINs did not meet the 70% offer threshold. A single employee received a PTC for a single month, causing the IRS to demand more than $150,000 in tax payments.
For more details on some of these subtle but certainly non-trivial penalties and fines see this article from Accenture, https://newsroom.accenture.com/news/employer-penalties-for-health-insurance-mandate-expected-to-reach-31b-for-2016-accenture-finds.htm, and drill deep into the estimated impacts to organizations for being just o slightly out of compliance.
Categorized in: ACA