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IRS Releases New Guidance on ACA Employer Shared Responsibility Assessments for 2015

The IRS announced it will begin issuing employer shared responsibility assessments in late-2017 to employers that weren't in ACA compliance in 2015. Here's what to do if you receive a notice.
  • IRS plans to issue assessment notices to businesses for 2015 tax filings that do not meet health coverage offer requirements under the employer shared responsibility provisions of the Affordable Care Act (ACA).
  • ACA requires applicable large employers to offer minimum essential coverage that is affordable and provides minimum value to their full-time employees and their dependents or risk an assessment.
  • Applicable large employers have information-reporting responsibilities regarding the coverage offered to full-time employees.
  • Penalty notices should begin arriving late in 2017 for 2015 tax filings.
  • The IRS will give businesses receiving notices a chance to respond before demanding final payment.

IRS will send penalty notices to employers not in ACA compliance in 2015

On Nov. 2, 2017, the IRS released new guidance on the employer shared responsibility assessments of the Affordable Care Act (ACA). The agency indicates that it plans to issue penalty notices to businesses for 2015 tax filings that had full-time employees enrolled in a qualified health plan for which a premium tax credit was allowed.

The IRS is tasked with enforcing and collecting assessments for the ACA shared responsibility provisions. The law requires certain employers (called applicable large employers, or ALEs) to offer minimum essential coverage that is affordable and that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Most U.S. employers don't qualify as ALEs based on the size of their workforces, and therefore are not subject to the employer shared responsibility provisions.

Additionally, ALEs have information reporting responsibilities regarding the coverage they offer. They must send reports to employees and the IRS. The IRS uses the information reported on forms 1094-C/1095-C to reconcile the assessment of the employer shared responsibility payment (ESRP).

This is the first time that businesses will be notified of penalties since the ACA employer shared responsibility regulations became effective in 2015. Companies should begin receiving notices by late-2017 for their 2015 tax filings. Those who receive notices will need to research the issues detailed, correct any errors in the previous filing, and communicate with the IRS. At the same time, companies must also prepare for current-year ACA obligations.

Assessment notices expected, but not the timeline

Ever since the ACA took effect, employers knew that they might anticipate notices for 4980H assessments. Full-time employees who purchased health insurance via a government marketplace and received a premium tax credit could trigger 4980H notices for ALEs not offering adequate and affordable coverage to full-time staff. The IRS will give businesses receiving 4980H excise tax notices a chance to respond before demanding final payment. The agency built a case management system to deal with these assessments, but until now businesses didn't know when to expect the notices and the specifics.

Next steps if you receive a notice

Business owners who have questions around this guidance should consult the IRS' Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

If your company receives a notice, and/or you need help preparing for current-year ACA obligations and compliance, Paychex can help.

laurie savage headshot
Laurie Savage is a compliance professional and subject matter expert on the Affordable Care Act (ACA) for Paychex Inc. specializing in Health Care Reform.
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