The Patient Protection and Affordable Care Act (“ACA”), also known as Obamacare, has faced serious and rising criticism since it was signed into law more than eight years ago. It overhauled the nation’s health care system and over the last year has been partially repealed. However, while some key provisions of the ACA are gone, large portions, including the employer mandate, remain intact.
The employer mandate requires applicable large employers (i.e. those with 50 or more full-time or full-time equivalent employees) to offer each full-time employee affordable minimum essential health insurance coverage each year or face steep tax penalties. While the individual mandate tax penalties have been repealed beginning in 2019, the employer mandate and the associated penalties remain alive and well.
The first round of proposed assessments, issued via Form Letter 226J, have been sent by the IRS for violations of the employer mandate that the IRS alleges to have occurred in 2015. A second wave of proposed assessments is expected to be issued before the end of the year for violations of the employer mandate that the IRS alleges to have occurred in 2016.
Proposed assessments can, and often should, be challenged. Many times, the violation occurred as a result of an error in reporting offers of insurance coverage to the IRS, rather than as a result of actual violations of the employer mandate. Some employers incorrectly believe that the proposed assessment is a final determination and agree to pay it using Form 14764. Once an employer agrees to the assessment, it becomes significantly more difficult to challenge.
Employers who fail to comply with the employer mandate based on the belief that it has been repealed or will be repealed in the near future are mistaken. While in July 2018, the House Ways and Means Committee proposed legislation (H.R. 4616) that would temporarily eliminate the penalties associated with the employer mandate from 2015 through 2018, that legislation has yet to be voted on in the House of Representatives. Absent some further action on H.R. 4616 or similar legislation, the employer mandate will continue to be enforceable through tax penalties.
The ACA requires employers to report to the IRS certain information about their employee’s health care coverage on Forms 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage). While the tax penalties associated with individual mandate have been repealed, the reporting requirement on Form 1095-C remains unchanged for now. However, it is expected that Form 1095-C will be modified beginning in 2019 due to the fact that reporting on employee coverage will have no practical effect after that time, given the recent repeal of the individual mandate. It is also important to note that employers who receive a proposed assessment as a result of an error in reporting should not issue corrected Forms 1095-C and 1094-C absent clear guidance published by the IRS.
What Does This Mean For You? If you are an applicable large employer under the ACA, you should continue to comply with the employer mandate. If you receive a proposed assessment from the IRS that you believe was the result of a reporting error, you should consult counsel or other competent professionals before agreeing to pay the assessment or any portion thereof and, unless instructed otherwise by the IRS, you should not reissue corrected Forms 1094-C and 1095-C to your employees or the IRS.
If you have any questions about this or any other employment or labor law issue, please contact Grace Nguyen Bond at 717-509-7226 or firstname.lastname@example.org, or Whitney Rahman at 717-509-7237 or email@example.com.