AP Compliance Alert: Pay or Play Enforcement Is Here
As we reported in our 2nd Quarter Newsletter, the IRS has indicated it would notify applicable large employers (ALEs) in 2017 of their potential penalties for failing to comply with the employer shared responsibility mandate for the 2015 calendar year. With the numerous attempts this year to repeal or replace the Affordable Care Act (ACA), ALEs may have thought ACA penalties would never come to fruition; unfortunately, that’s not the case.
On Nov. 2, 2017, the Internal Revenue Service (IRS) updated its Questions and Answers (Q&As) on the employer shared responsibility rules under the
ACA to include information on enforcement. These Q&As indicate that, for the 2015 calendar year, the IRS plans to issue Letter 226J informing ALEs
of their potential liability for any employer shared responsibility penalty in late 2017.
An ALE will generally have 30 days from the date on Letter 226J to respond before any employer shared responsibility liability is assessed and notice and demand for payment is made. Letter 226J will provide instructions for how an ALE should respond in writing, either agreeing with the proposed employer shared responsibility penalty or disagreeing with part or all or the proposed amount. If an ALE does not respond within the 30-day time frame, the IRS will assess the amount of the proposed employer mandate penalty and issue a notice and demand for payment in the form of a Notice CP 220J. Therefore, any ALE member who receives a Letter 226J must respond in a timely manner.
Once an ALE responds to Letter 226J, the IRS will reply with one of five different versions of Letter 227. Letter 227 will be an acknowledgement from the
IRS that it received an ALE’s response to Letter 226J and describe what further action needs to be taken by the ALE. If after receiving Letter 227
an ALE disagrees with the proposed or revised penalty, the ALE may request a pre-assessment conference with the IRS Office of Appeals. A conference
must be requested by the response date provided in Letter 227, which will generally be 30 days from the date of Letter 227.
- Maintain complete and accurate records regarding the health insurance coverage offered to employees;
- Designate a person or persons responsible for addressing the various IRS letters and notices (Letter 226J, Letter 227 and Notice CP 220J);
- Notify mail room and other applicable staff of the importance of these IRS letters/notices and to whom they should be given upon receipt;
- Put documented procedures in place so that appeals and conference requests are filed within the required 30-day timeframes;
Links to additional information and resources:
Should you have any questions or concerns please contact a member of the AssuredPartners’ Benefits Team
You may also view this alert directly on our corporate website by clicking here.