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Get Prepared for IRS ACA Employer Penalty Notices

Get Prepared for IRS ACA Employer Penalty Notices

The ACA contains provisions regarding an Employer’s Shared Responsibility to offer health coverage to employees. These provisions apply to Applicable Large Employers (ALEs), those with 50 or more full-time plus full-time equivalent employees.

Penalties are assessed on ALEs that fail to offer health coverage to their full-time employees or if they offer coverage and the coverage is deemed unaffordable, or if the offer of coverage does not meet minimum value standards. ALEs are also subject to a penalty if they fail to report these offers to the IRS.

On November 2, the IRS updated the Q&A section of their web site and now provides much more detail for ALEs regarding:

  • how they will be informed that they are subject to a penalty (technically referred to as an employer shared responsibility payment)
  • how they can appeal the penalty
  • how they can pay the penalty

At this time, the IRS is assessing penalties for non-complying ALEs for the 2015 calendar year. Keep in mind that certain requirements in that year were different than they are now. For example, today an employer must offer coverage to at least 95% of full-time employees or be subject to the penalty, but in 2015, the requirement was 70%.

Brokers whose clients were ALE’s during calendar 2015 should carefully review the IRS web site (resources below) and encourage their clients to do the same. And if a client receives a notice of employer shared responsibility payment due, encourage their client to read it carefully and respond fully if they intend to appeal.

It is also highly recommended that if a client receives such a notice, the broker should team up with the client and the client’s legal and tax advisors as well as any vendor the client used to prepare the information returns submitted to the IRS (Forms 1094 and 1095) for the year in question.

IRS web site: Q&A: Employer Shared Responsibility Provisions of the ACA

ADP’s “Eye on Washington” briefing explains the latest change to the IRS web site and provides a helpful refresh on the employer shared responsibility provision.

Contact your Claremont team at 800.696.4543 or

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