IRS Updates Guidance on Enforcement of ACA Employer Mandate

On November 2, 2017, the IRS updated its Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act webpage. The section of the webpage dealing with Making an Employer Shared Responsibility Payment indicates that the IRS intends to notify businesses that are Applicable Large Employers (ALEs) of their potential liability for an employer shared responsibility payment, if any, for the 2015 calendar year starting in late 2017.

The ACA’s Employer Shared Responsibility Mandate (Mandate), very generally, requires ALEs to offer affordable health insurance to full-time employees or risk having to pay an employer shared responsibility payment to the IRS. Because as of the beginning of November 2017 the IRS has yet to start collecting payments under the Mandate, some had questioned whether the IRS would ever actually enforce the Mandate.

The IRS updated its Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act webpage on November 2, 2017, and the questions and answers contained in the Making an Employer Shared Responsibility Payment section leave little doubt that the IRS intends to start seeking to collect payments before the end of the year. According to the IRS, they intend to seek payments beginning with distribution of Letter 226J to employers this year. Letter 226J will include:

• a brief explanation of section 4980H,

• an employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b) or neither,

• an explanation of the employer shared responsibility payment summary table,

• an employer shared responsibility response form, Form 14764, “ESRP Response”,

• an employee PTC list, Form 14765, “Employee Premium Tax Credit (PTC) List” which lists, by month, the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief (see instructions for Forms 1094-C and 1095-C, Line 16), and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C,

• a description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J, and

• a description of the actions the IRS will take if the ALE does not respond timely to Letter 226J.

The response to Letter 226J will be due by the response date shown on Letter 226J, which generally will be 30 days from the date of Letter 226J.

If, after correspondence between the company and the IRS, the IRS determines a business is liable for an employer shared responsibility payment, they will issue Notice CP 220J - a notice and demand for payment. This notice will reflect payments made, credits applied, balance due, if any, and instructions of how to make payment, if any.

Therefore, as franchisees approach the end of 2018, they should connect with their HR or tax provider to ensure continued compliance with the ACA and promptly respond to notices from the IRS regarding the employer shared responsibility mandate.

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