IRS to Start Issuing Obamacare Penalty Letters to Employers Next Month

President Trump may be beating the drum to end the Obamacare individual mandate with looming tax reform legislation (to little avail so far), but the Internal Revenue Service (IRS) is already gearing up to enforce both that mandate and the employer shared responsibility mandate for businesses with 50 or more employees.

obamacare-penalties-focus-of-IRS

The IRS will begin sending Obamacare penalty notices to employers in December.

The agency announced it will begin sending what is known as Letter 226J to Applicable Large Employers (ALEs) in December if it determines that, “for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee).”

Once an employer receives Letter 226J — notice of potential employer shared responsible payment (ESRP) — he has 30 days to respond.

The IRS announced its intentions this past week with its update of its “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act (ACA), questions 55 through 58.

According to the IRS, Letter 226J will include:

  • a brief explanation of section 4980H,
  • an employer shared responsibility payment summary table itemizing the proposed payment by month and indicating for each month if the liability is under section 4980H(a) or section 4980H(b) or neither,
  • an explanation of the employer shared responsibility payment summary table,
  • an employer shared responsibility response form, Form 14764, “ESRP Response”,
  • an employee PTC list, Form 14765, “Employee Premium Tax Credit (PTC) List” which lists, by month, the ALE’s assessable full-time employees (individuals who for at least one month in the year were full-time employees allowed a premium tax credit and for whom the ALE did not qualify for an affordability safe harbor or other relief (see instructions for Forms 1094-C and 1095-C, Line 16), and the indicator codes, if any, the ALE reported on lines 14 and 16 of each assessable full-time employee’s Form 1095-C,
  • a description of the actions the ALE should take if it agrees or disagrees with the proposed employer shared responsibility payment in Letter 226J, and
  • a description of the actions the IRS will take if the ALE does not respond timely to Letter 226J.

The response to Letter 226J will be due by the response date shown on Letter 226J, which generally will be 30 days from the date of Letter 226J.

Letter 226J will contain the name and contact information of a specific IRS employee that the ALE should contact if the ALE has questions about the letter.


NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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