IRS Releases Fact Sheet on Employer Mandate Procedures
The IRS recently released a new fact sheet explaining the process the agency plans to use to administer the employer mandate under the Patient Protection and Affordable Care Act (ACA).
Beginning January 1, 2015, the ACA imposes two potential penalties— (1) a penalty imposed on employers that choose not to offer healthcare coverage to substantially all of their full-time employees, and (2) a penalty imposed on employers that offer coverage, but the coverage offered is not adequate or affordable under the law. Both penalties are triggered when any one full-time employee obtains health insurance through the Public Exchange Marketplace (Marketplace) and receives a premium tax credit.
The new IRS fact sheet details these two types of penalties and how they will be calculated. It sets forth how the penalties will be imposed month-by-month, and gives examples of how the penalties might be assessed in various scenarios.
The fact sheet also explains that employers will not self-report or calculate these employer shared responsibility payments. Rather, the IRS will calculate the potential penalty due and contact the employer. The IRS’ determination will occur after employees have filed their individual tax returns for the year claiming any premium tax credits. After the IRS sends the calculation to the employer, the employer will have an opportunity to respond to the IRS before any assessment or notice/demand for payment will be made. The IRS will adopt procedures to ensure that employers are notified when an employee receives the premium tax credit for purchasing coverage through the Marketplace.
Employers should begin to think about the ACA and to prepare now, before an assessment or collection notice arrives from the IRS. Applicable transition relief, ACA safe harbors, and careful workforce planning can minimize or prevent employer mandate penalties. Thorough documentation will be an employer’s best defense against an IRS claim that an employer mandate penalty is due. Please visit our website at HCReducation.com for a link to the fact sheet and more information about planning for the ACA’s employer mandate.