With all the Republican talk of repealing the Affordable Care Act (ACA), you might be under the impression that compliance is no longer essential – but you’d be wrong. Although the recently passed Senate tax bill includes a repeal of the individual mandate, the ACA is still the law, and employers are required to comply.
- Applicable Large Employers (ALEs) are still required to provide affordable minimum essential coverage. To be considered affordable, the premium for self-only coverage should not be more than 9.69 percent of the employee’s household income.
- ALE status can change. ALEs are those with 50 or more full-time or full-time equivalent employees. This is based on the previous year, which means the status can change from year to year. If your company has grown in 2017, its 2018 status may need to be reevaluated.
- ALEs are required to report. The IRS won’t just assume that you’re providing the necessary coverage. You need to prove it by filing the right forms. To meet the reporting requirements, ALEs must submit forms 1094-C and 1095-C to the IRS. Forms 1094-C and 1095-C must typically be filed by February 28 if filing on paper or March 31 if filing electronically. Because March 31, 2018 is a Saturday, the expected deadline is April 2, 2018. Form 1095-C must also be sent to full-time employees by March 2, 2018.
- Some figures have changed for 2018. Many key limits change each year, and 2018 is no exception. The out-of-pocket maximum for self-only coverage is going up to $7,350, and for family coverage it’s going up to $14,700. HSA annual deduction limits are going up to $3,450 for individuals with self-only coverage and to $6,900 for family coverage.
- ALEs that do not comply will be subject to penalties. Failure to file a correct information return can result in a penalty of $260 per statement, with a maximum penalty of $3,218,500 for one calendar year. Failure to prove a correct payee statement can also result in a $260 penalty for each statement, with a maximum of $3,218,500 for one calendar year. ALEs that do not offer affordable minimum essential coverage are subject to the employer shared responsibility payment. This penalty is calculated based on the number of full-time employees. The IRS Taxpayer Advocate Service provides an online tool to help employers estimate their maximum liability under the employer shared responsibility provision.
- The IRS is serious about collecting penalties. Although it’s taken a while, the IRS has announced that it will be sending out Letter 226J to ALEs that don’t appear to have provided sufficient coverage. The letter will include a preliminary calculation of the employer shared responsibility payment owed. Employers that disagree with the penalty can appeal, but they will have a limited time to do so. If no reply is received by the reply date listed on the letter, the IRS will send a demand for the payment, interest will start to accrue, and the payment will be subject to lien and levy enforcement. You can read a sample letter here.
If you have any employee benefits or compliance questions, our Benefit Advisory Services team is here to help!