Blog Post

IRS Begins to Enforce ACA Employer Shared Responsibility Provision

November 22, 2017

The Affordable Care Act (ACA) contains a stipulation called the Employer Shared Responsibility Provision. This provision requires employers with more than 50 employees to offer affordable coverage to their employees. Failure to provide affordable coverage can lead to stiff penalties levied against employers as excise taxes.

Up until now, the IRS has not enforced this provision because the agency needed time to build out its compliance systems and processes. With the systems now in place, the agency is ready to begin enforcing this provision. The IRS will begin the enforcement action by sending a Letter 226-J to employers with more than 100 employees who violated the law in 2015 (when the mandate first took effect).

You can read a sample of the IRS Letter 226-J at https://www.irs.gov/pub/notices/ltr226j.pdf

The IRS letter outlines the agency’s determination of non-compliance and includes the amount the employer owes in penalties. The letter includes a response form that employers can use to dispute the agency’s assessment. Employers have just thirty days to return the form to dispute the agency’s findings.

Any fines assessed under this provision can add up quickly. In general, employers can be fined approximately $2,000 per employee (not counting the first thirty employees) for failure to offer qualifying coverage to employees who work an average of 30 or more hours a week. The penalty kicks in if one of these employees buys insurance through the health insurance marketplace and receives a subsidy from the government to help pay for the coverage.

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