At long last, it looks as though the IRS is finally gearing up to assess Affordable Care Act (ACA) penalties based on 2015 employer responsibility reporting (1094-C and 1095-C forms). If your organization receives an assessment notice, you’ll want to scrutinize it carefully, as there may be many errors.
The IRS has updated its Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act with new details on how it plans to assess and collect employer shared responsibility payments (see Q&As 55-58). The IRS will initially send an employer Letter 226J that proposes an assessment of an employer-shared responsibility assessment. The letter will itemize the proposed assessment per month and describe the process the employer can follow if it agrees or disagrees with the proposed assessment. The letter will also provide a response deadline (expected to be 30 days from the date the 226J notice was issued) along with a response form. If an employer fails to respond, the IRS will issue the assessment. If the employer responds in time, the IRS will issue a Form 227, which will describe the process the employer can follow if it wants to appeal the IRS decision.
The guidance indicates that notices will start going out in “late 2017,” so you should be on the alert for these notices. Because the IRS had well-documented problems processing the 2015 forms, we expect numerous errors with the assessments. Moreover, while 30 days sounds like plenty of time to respond, the actual timeframe may be significantly shorter by the time your organization receives and routes the letter to the right people. It may also take you some time to research your records as you prepare your response.
If you receive a penalty assessment notice, or have other questions about the ACA’s employer responsibility rules, please contact Norbert Kugele, Stephanie Grant or any other member of the Warner Norcross & Judd Employee Benefits Practice Group.
