The IRS has officially announced they are sending out Employer Shared Responsibility Payment (ESRP) penalty letters. The initial letters are based on the 2015 tax year, and they plan to post this group of letters by the end of December 2017. You will find a sample of the lengthy letter here.
The letter is not an immediate demand for payment; instead, it gives employers a chance to engage with the IRS. In addition, it gives employers a firm response date, which is key. The employer is requested to respond by that date to explain their view of the ESRP penalty calculations within the letter. If the employer disagrees, the employer is asked to describe their position and supply different data to support it.
To address the shared responsibility payment rules, employers should take the following actions:
- Learn more about the rules through the resources available on the ACA Information Center for Applicable Large Employers (ALEs)
- Review ownership structures and perform an annual aggregated group analysis to determine which companies are in an aggregated group
- Identify each large employer based on employee counts in the prior calendar year
- Determine and document each employee’s full-time or part-time status by month based on ACA criteria
- Determine if the health plan meets the minimum essential coverage, minimum value and affordability standards and consider any needed health plan design changes
- Understand the potential penalty exposure if the health plan is not ACA-compliant
- File accurate Forms 1095-C and 1094-C
- Respond to Health Insurance Marketplace notices as needed. Those notices may be sent to the location where the employee worked. Communicate to all Managers that this information should be sent to HR.
- Respond promptly to the IRS upon receipt of a Letter 226J and visit Understanding your Letter 226-J for more information
ACA Information Center for Applicable Large Employers (ALEs):
Employer Shared Responsibility Provisions:
Understanding your Letter 226-J:
Sample IRS Letter:
Important Notice: This article is meant strictly for informational purposes. For advice or assistance regarding the ESRP or other aspects of health care law, please seek advice or counsel from the IRS or your Tax Attorney. Efficient Forms [EfficientHire, EfficientACA] or any employee thereof, shall not be responsible or legally obligated in any way to the actuality for any employer’s situation to statements herein.