What HR Needs to Know About the Government Shutdown and ACA
Orginally published January 21, 2019, updated January 30, 2019
What happened during the U.S. Government shutdown?
The U.S. Government shutdown lasted 35 days and cost the economy over $3 Billion. Even though the shutdown ended on Jan. 25, it continues to impact employers who are complying with the Affordable Care Act (ACA) employer mandate.
Here are some of the top concerns for employers during the shutdown:
No impact to the 1095-C mailing deadlines and 1094-C/1095-C filing deadline
The IRS held fast on deadlines for mailing 1095-C tax forms to employees, even though they did approve automatic 30-day extensions on the deadlines late last year. The IRS’ AIR system, which processes ACA tax filings, was considered critical and retained funding throughout the shutdown. It returned from maintenance on January 17th – two days behind schedule. While most employers printed forms prior to the January 31st deadline, the IRS is allowing employers an extra 30 days to mail their forms.
New Letter 226J penalty letters coming, after a delay
For a few weeks prior to the shutdown, a rush of new IRS penalty notices, Letter 226Js, hit employers announcing penalties for the 2016 tax year. The previous season for the 2015 tax year had subsided over the summer, with the IRS steadily working through responses and moving onto Letter 227s which confirm resolution or indicate a demand of tax payment.
During the shutdown, phone calls and faxes to the IRS went unanswered so employers were unable to ask for status, seek clarification, or request extensions. We recommended that requests for extensions should be mailed as soon as possible after receiving a notice, but encourage employers to check in to see if their requests were processed. Time will tell how the IRS will handle extension requests received during the shut down.
Our research shows only major A-penalties had been sent by the IRS prior to the shutdown, which assesses a tax when employers did not offer qualifying coverage to more than 95% of full time employees during a month in which an employee received a Premium Tax Credit. Now that the shutdown has ended, we expect the IRS will continue with A-penalties and then move on to B-penalties, just as they did for the 2015 tax year. They will first need to get through their backlog from the shutdown.
No new ACA-related legislation
So far, all proposed legislation from the House of Representatives have been about funding specific areas of the Government but have failed or not been taken up by the Senate. Any legislation that previously were up for vote prior to the new Congress, such as the popular provisions to expand HSAs or protect pre-existing conditions, have expired and thus far not been re-introduced.
The three-week countdown
The reinstated government is only for three weeks and it remains to be seen whether another shutdown will be averted with negotiations and agreements. However, any shutdown during late February and March could bring significant concern for employers filing with the IRS. While the employees who manage the AIR system are considered critical, the employees who answer questions or assist vendors with any issues were missing during the last shutdown. The IRS has not stated whether more time will be given for filing forms, but we strongly encourage employers to file early in case another shutdown comes.
Categorized in: ACA