IRS to Begin Enforcing 4980H Penalties on Large Employers Before End of 2017

On November 2, 2017, the IRS issued guidance regarding the enforcement of Employer Shared Responsibility payments, otherwise known as the Section 4980H penalty. Questions 55-58 of the IRS Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act indicate that the IRS is moving forward with assessing penalties on Applicable Large Employers (“ALEs”) who failed to offer appropriate health care coverage under Section 4980H for the 2015 calendar year.

An ALE is generally an employer who employs at least 50 full-time employees during the calendar year. An ALE will be assessed a penalty for the 2015 year if any full-time employee received a premium tax credit or cost-sharing reduction and either: (a) the employer failed to provide minimum essential health coverage to 95% of its full-time employees; or (b) the employer offered minimum essential health coverage to 95% of its full-time employees, but the coverage was not affordable or did not provide minimum value. Read More ›

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Full Steam Ahead: IRS Moves Forward to Collect Affordable Care Act Penalties

As efforts to reform the Affordable Care Act (the “ACA”) stall in Congress, a recent government report suggests that the Internal Revenue Service is preparing to identify and collect employer shared responsibility penalties.

The Treasury Inspector General for Tax Administration issued the report, Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision, two weeks after House leadership retracted a bid to repeal and replace the ACA.

The report indicates that the IRS processed over 400,000 Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) and nearly 110 million Forms 1095-C (Employer-Provided Health Insurance Offer and Coverage) as of last October.  Read More ›

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ACA Information Reporting Penalties Have Been Increased

Code Sections 6055 and 6056 require large employers and all employers (even small employers) sponsoring self-funded health plans to file information returns with the IRS and furnish statements to applicable employees concerning the health coverage offered or provided to these employees and their dependents.  This information reporting begins in 2016 with respect to 2015 coverage.  It will be similar to Form W-2 reporting.

The Trade Preferences Extension Act of 2015 (the “TPEA”), enacted on June 29, 2015, increased the penalties for failing to comply with these new reporting requirements.  Before the TPEA, penalties were $100 per failure with an annual maximum of $1.5 million.  Read More ›

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Health Care Reform 2015 – An Update

2015 is a significant year for health care reform because the large employer shared responsibility penalties under Internal Revenue Code Section 4980H take effect for most large employers.  See our SW Benefits Update, Health Care Reform’s Employer Shared Responsibility Penalties:  A Checklist for Employers, for a detailed explanation of the large employer penalties.

Many people are under the mistaken impression that Health Care Reform might go away because of the recent changes in Congress.  As explained below, that is not likely anytime in the near future.  Accordingly, large employers may wish to move forward now with their large employer penalty compliance efforts. Read More ›

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Final Regs on Health Care Reform Large Employer Penalties May Help Employers Who Hire Employees From Staffing Firms

As explained in my Checklist for Employers, a large employer will have to pay a subsection (a) penalty for any month if it does not offer “minimum essential coverage” (“MEC”) to substantially all (i.e., 70% for 2015 and 95% for future years) of its full-time employees and their dependents if one or more full-time employees receive a premium tax credit to help pay for coverage on a Marketplace.

For purposes of the forgoing rule, employers must take into consideration each of their common law employees. Oftentimes, employees that an employer hires from a staffing firm may be the employer’s common law employees.  Read More ›

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Do you know who is in your controlled group? Employers need to know for purposes of the large employer shared responsibility penalties

Most employee benefit plans are subject to nondiscrimination rules.  In order to prevent employers from breaking apart companies in order to avoid these nondiscrimination rules, most employee benefit plans, in performing nondiscrimination testing, must take into account related businesses (i.e., controlled groups and affiliated service groups).

I’ve been blogging recently about the large employer shared responsibility penalties.  A big gotcha is that many employers do not know that the same related business rules apply in determining whether an employer is large.

Related companies are combined when determining whether an employer is large:  In determining whether an employer is “large” and is subject to the large employer shared responsibility penalties, employers must include all related businesses (each referred to as a “company”) under Internal Revenue Code Sections 414(b), (c), (m), and (o). Read More ›

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Final Regs on Health Care Reform Large Employer Penalties Include New Transition Relief Easing Employers Into Compliance

The IRS issued final regulations implementing the employer shared responsibility penalties on February 12, 2014.  As promised in an earlier post, I have updated our Checklist for Employers to reflect the final regulations.  Although the Checklist explains many of the transition rules, below is a summary of what I think are two of the most important new rules:

  • Transition relief for employers with 50-99 employees in 2014:  The large employer penalties will generally apply to employers with 100 or more full-time employees starting in 2015 and employers with 50 or more full-time employees starting in 2016. This new rule is great news for employers with 50-99 employees in 2014. 
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IRS Finally Issues Final Regs on Health Care Reform Large Employer Penalties — Employers May Want to Start Compliance Efforts Now

In July 2013, Treasury announced that the large employer shared responsibility penalties would not take effect until 2015.  This one-year delay was welcome news, but it unfortunately resulted in many employers pushing this issue to the back burner.

With the IRS just having published final regulations on February 12, 2014, now is a great time to refocus on this issue.  Here’s why employers should not delay:

  • An employer’s status as a large employer (i.e., whether they are subject to the penalties in 2015) is determined based on their full-time plus full-time equivalent common law employee headcount in 2014.
  • Employers can use a monthly measurement method to track full-time employee hours in 2015 or a look-back measurement method. 
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