The IRS has notified some employers with Letter 226-J that they may be liable to pay penalties for failing to comply with the ACA employer mandate during the 2015 tax year. First and foremost, the IRS is identifying those organizations that did not meet the ACA coverage threshold requirement. This letter has been sent to employers who have been identified as having at least one employee who was eligible to receive employer healthcare under the ACA, but instead enrolled in subsidized exchange coverage. Provided with the letter are details on how to respond and/or dispute the assessment.
Some employers who have received Letter 226-J have assessments of over $10 million in potential liabilities. If you receive Letter 226-J, here are some steps to comply and/or contest the assessment.
What to do if you Receive Letter 226-J
Step 1: Complete ESRP Response Form 14764 within 30 days from date of letter
With letter 226-J, employers will receive Form 14765, the “Employee Premium Tax Credit (PTC) List” that will list each month a full-time employee received a PTC. Compare your Form 1094-C and Form 1095-C for each identified employee to Form 14765.
Form 14764, “ESRP Response” is also provided for an employer to use to respond, indicating whether it agrees or disagrees with the penalty assessment. Complete the form, date and sign, and send back to the IRS within 30 days of receipt, with a statement concerning why you are disputing the assessment with supporting documents. If you agree with the assessment, you may simply enclose a check for the amount requested.
Health e(fx) Clients: If you are enrolled in Health e(fx) Managed Services, we will work with you to process and resolve the IRS correspondence.
For those who do not use Health e(fx) Managed Services, you can pull past Form 1094-C and/or Form 1095-C within the Health e(fx) system to compare the data to Form 14765.
Step 2: Respond to Letter 227
Once the IRS has received your Form 14764 they will send you Letter 227. If you disputed the information in Letter 226-J and agree with their revised assessment, or agreed with their initial assessment, simply follow the instructions enclosed with Letter 227. If you disagree with the revised assessment you can request the optional pre-assessment conference with the IRS Office of Appeals. To make this request, follow the instructions provided in Letter 227, and Publication 5, “Your Repeal Rights and How to Prepare a Protest if You Don’t Agree”, which can be found on the IRS website. You must request the conference in writing within 30 days of receiving Letter 227.
Step 3: IRS Notice CP 220-J, Pay or Challenge
After responding to Letter 227, or after your conference with the IRS Office of Appeals, you will receive Notice CP 220-J asking you to pay the reassessed penalty. If the numbers are correct and you have yet to pay your penalties, simply pay the amount requested electronically, or via check. If you continue to disagree with the assessment, consult legal counsel on how to proceed next.
How Health e(fx) Can Help
At this time, no Health e(fx) clients who worked with us in 2015 have received an assessment letter. Health e(fx) clients can use our system to easily manage the information required to defend against ACA shared responsibility penalties and respond on a timely basis. Clients can reduce their penalty risk through monthly compliance and eligibility management.
Health e(fx) provides services directly to employers, and also licenses the SaaS technology to strategic partners for private-labeling.