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As previously indicated in November of 2017, the IRS has begun sending ACA penalty letters for the 2015 reporting year (Letter 226-J). The IRS estimates it will send over 100,000 letters for 2015 alone, assessing nearly $5 billion in fees.

What employers need to know

The ACA’s employer shared responsibility rules require applicable large employers (ALEs) to offer affordable, minimum value health coverage to their full-time employees or pay a penalty. These rules, also known as the “employer mandate” or “pay or play” rules, only apply to ALEs, which are employers with, on average, at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year. The IRS calculates the penalties based on forms 1094 & 1095-C filed in 2015, and the individual tax returns filed by the ALE’s employees.

The Letter 226-J includes the amount owed, an explanation why, a phone number to ask for an extension (highly recommended), instructions for how to respond (both if the company agrees or disagrees), and information about what will happen if the company does not respond.

Next steps for employers who receive a penalty letter

Any company that receives an ACA Penalty Letter 226-J from the IRS has only 30 days from the date of the letter to respond to the IRS. Clients of HR Knowledge who receive the letter should reach out immediately to their Client Account Manager.

To ensure you stay protected from penalties under the ACA Safe Harbor, ensure you have an ERISA Plan Document/SPD in place and that your Plan Year coincides with the Group Health Plan Benefit renewal. If you do not currently have an ERISA plan in place, or would like more information, contact us.

This content is provided with the understanding that HR Knowledge is not rendering legal advice. While every effort is made to provide current information, the law changes regularly and laws may vary depending on the state or municipality. The material is made available for informational purposes only and is not a substitute for legal advice or your professional judgment. You should review applicable laws in your jurisdiction and consult experienced counsel for legal advice. If you have any questions regarding this blog, please contact HR Knowledge at 508.339.1300 or email us.