Audit Reveals Pay or Play Enforcement Issues

Have you been wondering when the IRS was going to assess the “Pay or Play” penalties outlined in the Affordable Care Act? 2016 was categorized as another good faith filing year, and you wouldn’t be alone if you were questioning where does this leave us for 2017. As we have all seen in the headlines, the future of ACA remains unclear leaving us with no other option other than to proceed as if the repeal and replace initiatives will be dead-ended. Below is an excerpt from an article produced by Zywave, a content partner to Steele.  To download the full article, see link at bottom of the page.

Future Enforcement

At this time, the IRS has been unable to identify the employers potentially subject to an employer shared responsibility penalty or to assess any penalties. To enforce these rules going forward, the IRS plans to mail a letter to ALEs informing them of their potential liability for a penalty. These letters will:

  1. Include the names of the employees who received a subsidy for the applicable tax year; and
  2. Provide ALEs with an opportunity to respond before any penalty liability is assessed or notice and demand for payment is made.

These letters are separate from the Section 1411 Certification sent by the Department of Health and Human Services (HHS) that employers began receiving in 2016. The Section 1411 Certifications are sent to all employers with employees who receive a subsidy to purchase coverage through an Exchange (including both ALEs and non-ALEs). Section 1411 Certifications do not trigger or assess any penalties for any employers.

The IRS previously indicated that it expected to begin sending letters in early 2017 informing ALEs that filed Forms 1094-C and 1095-C of their potential liability for an employer shared responsibility penalty for the 2015 calendar year (with reporting in 2016). However, at this time, no letters have been sent to any ALEs.

For future years, the IRS expects to begin issuing these letters in the latter part of each calendar year in which reporting was due (for example, in late 2018 for reporting in 2018 for coverage in 2017).

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