1. Employer Mandate Enforcement Update: $4
Employer Mandate Enforcement Update: $4.4 Billion in Penalties and Counting
Kate Ball, J.D. | August 30, 2018
The IRS has sent more than 30,000 Letter 226J notices to employers containing penalty assessments of $4.4 billion for not complying with the Affordable Care Act.  A significant portion of the 2015 penalty assessments thus far was caused by errors in the compliance process. In this session, an ACA expert will identify the common errors that impact the amount of the penalty assessments levied by the IRS in Letter 226J.  She will explain why these errors are significant, how to avoid making them, and how they can impact the accuracy of the information in your annual ACA filing with the IRS if they are not corrected. 
That number is currently estimated to be $228 billion over the next ten years, resulting in a net revenue effect to the IRS of $178 billion over that time period.

2. Enforcement Via ESRP Letters

3. Discussion
Why Did I Receive an “Employer Shared Responsibility Payment” ESRP Letter?
How Do I Respond?
Recordkeeping Tips

4. Why Did I Receive an ESRP Letter?
Your organization is an ALE
Your organization had 50 or more FT or FTE employees in the year preceding the penalty year
ALE status is determined based on the number of employees in the previous calendar year, using a specific counting method
Organizations that are part of a controlled group or affiliated service group are aggregated for the purposes of determining ALE status
Aggregated ALE group vs. ALE member

5. Why Did I Receive an ESRP Letter?
You failed to offer coverage to substantially all of your FT employees
ALEs are subject to the Employer Mandate, which requires:
An offer of MEC to 95% of FT employees and their dependent children
Failure triggers the 4980H(a) penalty of $2,500* x the number of FT employees, minus the first 30
MEC offered is also “affordable” and provides “minimum value”
Failure triggers the 4980H(b) penalty of $3,750* x the number of FT employees that receive a premium tax credit for Marketplace coverage
It was minus the first 80 in 2015
*annualized 2019 penalty amounts
2015 penalties were $2,080/$3,120
2016 penalties were $2,160/$3,240
2017 penalties were $2,260/$3,390
2018 penalties were $2,320/$3,480

6. Why Did I Receive an ESRP Letter?
You reported this to the IRS via Form 1094-C
M&A

7. Why Did I Receive an ESRP Letter?
You reported this to the IRS via Form 1094-C
M&A

8. Why Did I Receive an ESRP Letter?
You reported this to the IRS via Form 1094-C
M&A

9. Why Did I Receive an ESRP Letter?
You reported this to the IRS via Form 1094-C
M&A

10. Why Did I Receive an ESRP Letter?
One or more of your FT employees was not offered affordable, minimum value coverage, and received a premium tax credit for Marketplace coverage
ALEs are subject to the Employer Mandate, which requires:
An offer of MEC to 95% of FT employees and their dependent children
Failure triggers the 4980H(a) penalty of $2,500* x the number of FT employees, minus the first 30
MEC offered is also “affordable” and provides “minimum value”
Failure triggers the 4980H(b) penalty of $3,750* x the number of FT employees that receive a premium tax credit for Marketplace coverage
M&A
*annualized 2019 penalty amounts
2015 penalties were $2,080/$3,120
2016 penalties were $2,160/$3,240
2017 penalties were $2,260/$3,390
2018 penalties were $2,320/$3,480

11. Why Did I Receive an ESRP Letter?
The letters include a table illustrating how penalties were assessed
M&A

12. Why Did I Receive an ESRP Letter?
The letters include a listing reflecting the Form 1095-C, Line 16 codes for the employees who received premium tax credits
M&A

13. How Do I Respond?
Form 14764
Using Form 14764, which is included in the letter
If you disagree with the proposed ESRP, include a signed statement explaining why you disagree
You may include supporting documentation
Bill in the works for relief hr 46-16

14. How Do I Respond?
Make any corrections to the Form 1095-C, Line 16 coding on Form and include it in your response
Remember, this is a list of all employees who received PTCs

15. How Do I Respond? DOs and DON’Ts Do Don’t
Respond by the date indicated in the letter, or request a 30-day extension
Contact reporting vendor and pull Forms 1094-C and 1095-Cs for the year in question
Provide any additional information on the errors in the signed statement
Jane Smith was hired on June 15, 2015 as a variable hour employee and entered into a 12-month initial measurement period on July 1, To reflect this, the PTC Listing has been corrected with code 2D to reflect that Jane was in a limited non-assessment period for the months of June to December 2015.
Await IRS response via Letter 227
Don’t
Refile Forms 1094-C or 1095-Cs for the year in question
IRS has also said don’t refile forms for the next year because they are going to pull them for audit

16. Recordkeeping How to prepare for an ESRP letter
Retain copies of your filed Forms 1094-C and 1095-C
If the vendor keeps them, ask for copies
Retain information regarding ALE status, offers of coverage, FT status, affordability, minimum value, and any other data that is reported on Forms 1094-C and 1095-C
Retain information for at least three years to comply with IRS record retention requirements
If you switch reporting vendors, ensure that you retain your data
Avoid discrepancies on Forms 1094-C from one year to the next
In M&A, don’t forget to collect information as part of due diligence
Bill in the works for relief hr 46-16
Review vendor contracts to make sure they are going to retain the records for at least that long

17. Questions?
Kate Ball, J.D.
Area Assistant Vice President, Compliance Counsel

18. The intent of this presentation is to provide you with general information regarding the status of, and/or potential concerns related to, your current employee benefits issue.  It does not necessarily fully address all your specific issues.  It should not be construed as, nor is it intended to provide, legal or tax advice. Questions regarding specific issues should be addressed by your organization’s general counsel, tax advisor, or an attorney who specializes in this practice area.