By - May 31, 2016

What ACA Employee Subsidy Notifications Mean For You

ACA employee subsidy notifications via mail

As employers face the challenge of providing affordable health care benefits to eligible employees, there’s a key issue that has HR and benefits teams concerned: employee subsidy notifications.

These ACA subsidy notifications are essentially statements from the government claiming the company in question did not offer an affordable level of healthcare to an employee. In some cases, the employer will know that they were not able to offer affordable coverage to an employee, but in other situations, the employee may have been offered affordable coverage, but chosen to go to the exchange instead. If that employee received a subsidy from the exchange, the employer will receive a subsidy notice.

What employee subsidy notifications mean for your organization

Generally speaking, an employee subsidy notification will come in the form of a letter from the Department of Health and Human Services (HHS). The exact language of these letters will vary depending on the situation, but by and large their content will state that an employee of the company received “advance premium tax credits (APTC) and cost sharing reductions (CSRs)”  because they were not offered affordable, minimum-value employer-sponsored coverage, thus causing them to seek healthcare coverage in the ACA Marketplace. These letters will typically include the name of each employee who applied and qualified for the subsidies.

An article from the Society for Human Resource Management (SHRM) outlines another situation that could result in a subsidy notification for an employer:

“ACME Corp. makes an offer of coverage that would have cost an employee $270 per month ($3,240 per year). The employee earns $35,000, which means the coverage is affordable under the 9.5-percent-of-wages rule. But the employee doesn’t want to pay $270 per month and has heard that he can call Healthcare.gov, tell the call center representative that his employer’s offer of coverage wasn’t affordable, and—with no questions asked or verification needed—be certified to buy a policy with a subsidy that would cost him just $30 per month.”

In this case, ACME Corp. would eventually receive a subsidy letter from the HHS stating the company was facing a penalty. Although the above example uses an employee who is deliberately looking to “beat the system”, so to speak, it should be noted that companies are equally liable for penalties resulting from employees who mistakenly received them.

For 2016, employers can expect to face a fine of $270 per month for each employee who qualifies for a subsidy on the public healthcare exchange.

Appealing an employee subsidy notification

The law states that employers have 90 days to appeal an employee subsidy notification. This appeal process is initiated by submitting the Employer Appeal Request Form. Although these appeals can usually be handled by an HR department on their own, it’s never a bad idea to have a legal team review both the original subsidy notification and your company’s appeal request.

One thing to note: subsidy notifications are mailed to the address that the employee provides. For employers with more than one location, it’s a good idea to communicate to all of your branches that notifications may come in, and to have a process in place for handling these notifications. Since there is a 90-day timeline, notices that are delivered to a regional office will need to be addressed quickly in order for there to be ample time for an appeal.

To provide the audit trail needed to appeal these employee subsidies, many companies opt to use an outsourced ACA compliance vendor to handle their benefits administration, compliance reporting, and subsidy appeals. A compliance vendor can act as the system of record, quickly compiling the data on each employee, including eligibility determination and affordability measurement.

We can help with ACA compliance & reporting

At Tango, we are committed to helping companies with their ACA compliance needs. Our team of experts have the resources and know-how to help your company with ACA compliance, IRS reporting, subsidy notices, and much more. Learn  about our comprehensive ACA Compliance & Reporting Solution or if you have any questions, Contact Us

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