Trusaic’s unique combination of data analytics, human expertise in regulatory compliance, ongoing monthly tracking, and penalty risk assessment gives companies the confidence they need to ensure their ACA compliance is done right.

We offer a free penalty risk assessment that provides comprehensive analysis of your potential exposure.

Yes, we offer unlimited expert support with annual filing for ACA Essential.

Yes, we can perform a retroactive audit of your HR data and create a penalty letter response for you, while in parallel developing ongoing ACA tracking to prevent future penalty letters.

Yes, you can add state filing for an additional fee to ACA Essential.

The ACA requires Applicable Large Employers (ALEs) to report on the 1094-C/1095-C forms information about the health care coverage if any, they offered to full-time employees. (For covered individuals other than employees, 1095-B forms can be used in lieu of 1095-C forms).

The 1094-C/1095-C schedules are not required for a non-Applicable Large Employer (ALE).  However, for a non-ALE that offers a self-insured health plan, the non-ALE will report on the individuals enrolled on the self-insured health plan on the 1094-B/1095-B Schedules.

The Applicable Large Employers (ALEs) are required to file and furnish 1095-Cs for each of their full-time employees. In addition, if an employer has self-insured coverage, the employer must report on all individuals who were enrolled on the self-insured health plan, including individuals who were not full-time employees, and non-employee individuals (e.g. spouses/dependents). The employer has the option to complete information about non-employee individuals using either Part III of the 1095-C or by using form 1095-B.

If an employer has at least 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is an Applicable Large Employer (ALE) for the current calendar year, and is therefore subject to the Employer Shared Responsibility Provisions (also referred to as the ACA Employer Mandate) and the Employer Information Reporting Provisions, which requires ALEs to report annually to the IRS information about the health care coverage, if any, they offered to full-time employees. The IRS will use this information to administer ACA penalties for non-compliance.

A full-time employee for any calendar month is an employee who has on average at least 30 hours of service per week during the calendar month or at least 130 hours of service during the calendar month.

A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee. An employer determines its number of full-time-equivalent employees for a month by combining the number of hours of service of all non-full-time employees for the month, but do not include more than 120 hours of service per employee, and divide the total by 120.

To determine its workforce size for a year, an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year and divides that total number by 12.

MEC stands for Minimum Essential Coverage.  In the employment context, an example of MEC would be an employer-sponsored health plan.

Under the ACA, an Applicable Large Employer (ALE) member may either offer affordable Minimum Essential Coverage that provides Minimum Value to its full-time employees (and their dependents) or potentially owe an Employer Shared Responsibility Payment to the IRS.  An employer-sponsored plan provides Minimum Value if it covers at least 60 percent of the total allowed cost of benefits that are expected to be incurred under the health care plan offered to full-time employees.

The full-time employees do not in and of themselves file the 1095-Cs (or 1095-Bs). Rather, it is the ALE that is required to file and furnish 1095-Cs for each of their full-time employees.  In addition, if the employer has self-insured coverage, the employer must report on all individuals who were enrolled on the self-insured health plan, including individuals who were not full-time employees, and non-employee individuals (e.g. spouses/dependents). The employer has the option to complete information about non-employee individuals using either Part III of the 1095-C or by using form 1095-B.

There are two alternative methods that are available to some employers.

The Qualifying Offer Method may be used as an alternative to completing the 1095-C forms if a fully insured employer can certify the following:

That one or more of its full-time employees for all calendar months during the calendar year in which the employee was a full-time employee for whom an Employer Shared Responsibility Payment could apply, that such employee(s) received a “Qualifying Offer.”

 A “Qualifying Offer” must:

• meet Minimum Value for each such employee
• meet affordability based on the mainland federal poverty level for each such employee
• the offer of coverage must be made to the employee’s spouse and dependents.

(Note: such an employer fills in code 1A for line 14 for every such month even if not all months apply.  However, the alternative to furnishing the 1095-C form is not available if not all months apply.)  The alternative to furnishing the 1095-C form is a simplified statement that the employee received a Qualifying Offer for all 12 months of the year. (Also note, self-insured employers cannot use the alternative statement.)   See https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-reporting-of-offers-of-health-insurance-coverage-by-employers-section-6056

The 98% Offer Method may be used if the employer can certify that at least 98% of all employees for whom the 1095-C applies (i.e., full-time) was offered to the employee, spouse and dependents and that such coverage was affordable and met Minimum Value.  Note that the employer must still furnish and file the 1095-C form to all of its full-time employees (who were full time for at one or more months of the year) so the “reporting method” is still the same, i.e., furnish and file the 1095-C.  However, if the 98% offer method is used, the employer need not complete the full-time count portion of the 1094-C form.

It should be noted that the previously available transition relief which only applied for 2015 for reporting to the IRS is no longer available, i.e., Transitional Relief under the Qualifying Offer Method no longer applies.  This means that any mistakes in accuracy will no longer be an excuse for employers providing inaccurate information when filing their ACA information with the IRS.

Yes.  See proposed IRS rule seeking to expand the mandatory filing requirement by adding in language to cover the 250-return threshold to combine returns, including W-2s and 1095-Cs. 
See https://www.gpo.gov/fdsys/pkg/FR-2018-05-31/pdf/2018-11749.pdf. 

If an ALE offers a full-time employee coverage for the plan year and that employee declines, the employer is covered as having made the offer for the plan year.  Of course, the employer should document the offer, including the timeframe for which the offer covers, e.g., the start and end date of the coverage.  Depending on the employer’s health plan’s related summary plan documents, if there is a Qualifying Life Event after an employee declines an offer of coverage, such as getting married, having a baby, or losing health coverage, typically the employee can accept the offer within a certain amount of time (e.g., 30 days) from the Qualifying Life Event.

Under the ACA’s Employer Mandate, the employer is obligated to offer full-time employee coverage.  Presumably, if the employee already has coverage through a spousal plan, the employee would decline an offer from his or her employer.  The Employer Mandate obligation is to make the offer to the employee, and not necessarily to enroll the employee.  Of course, if the employee is in fact enrolled, you will need to track that as well.  The Employer Mandate does not require the employer to track where the employees have obtained coverage if outside of the employer.

In general, if the “interns” were reasonably expected to be “full-time” at the time of their hire, they would be required to be offered coverage no later than 90 days from their start date.  However, the “interns” may qualify as “seasonal employees,” which are employees in positions for which “the customary annual employment is six months or less,” whereby “customary” means that “by the nature of the position an employee in this position typically works for a period of six months or less, and that period should begin each calendar year in approximately the same part of the year, such as summer or winter.”  If the interns are such seasonal employees, and the employer properly applies the Look-Back Measurement Method using, say, a six-month measurement period, these “interns,” who presumably work only through the summer, should remain in their “initial measurement period,” and hence are not required to be offered coverage within 90 days.  In short, you may not be required to offer coverage depending on the application of the Look-Back Measurement Method. 

A “seasonal employee” is an employee in a position for which “the customary annual employment is six months or less,” whereby “customary” means that “by the nature of the position an employee in this position typically works for a period of six months or less, and that period should begin each calendar year in approximately the same part of the year, such as summer or winter.”  If the employer properly applies the Look-Back Measurement Method using, for example, a 12-month measurement period, these “seasonal employees” would remain in their “initial measurement period” throughout their 10 to 12 weeks, and hence are not required to be offered coverage within 90 days.

Any talk about simplifying the ACA you may have heard was probably in the context of various repeal proposals in Congress, all of which are no longer being considered.  With the ACA here to stay, having a trusted and knowledgeable outside vendor to prepare your ACA reporting is key to navigating the complicated ACA process.  A good vendor should have a deep knowledge of the ACA. The vendor also should be able to provide you with a description of how your information will be processed to develop a filing that will meet all ACA rules. You want to know if the vendor just provides software or if there are experts involved, experts who will be there to answer your questions and walk you through the process when necessary.  Finally, you should work with a vendor that will stand behind their work. You want a company that will be there by your side if you have to respond to an ACA exchange notice or IRS ACA audit. Trusaic can do all of that for you.

Yes. If you are aware of errors, you should correct them promptly.  Error correction within a reasonable period of time from discovery is part of showing your good faith effort to the IRS in complying with the ACA. This is important to be eligible for good faith effort transition relief from penalties.

The Taxpayer Identification Number (TIN) error reconciliation process is a process to address TIN errors.  For example, if the IRS Affordable Care Act Information Returns (AIRS) system indicates that an employer’s filing is “accepted with errors,” a list is provided containing all of the employees with respect to whom a TIN error was noted.  This typically occurs due to mismatches in the legal names and social security numbers (i.e., TIN) of those employees.  This list should be cross-referenced with the employer’s HR/payroll records, which may be out of date.  The employer should be engaging in the TIN solicitation process to ensure names or Social Security numbers (SSNs) are up to date.  Employers filing 1095-C Schedules that contain incorrect TINs will not be subject to penalties if they comply with the TIN solicitation requirements.  See IRS Pub. 1586, p. 10 (identifying the TIN solicitation process for 1095-C Schedules modifying the process in Treasury Reg. 301.6724-1(f)).  Once the names and SSNs are corrected, the employer will want to use the corrected information for future 1095-C filings.  (The IRS does not require the filing of corrections to SSN or name errors alone without any corrections to the amounts identified in the 1095-C).

If there is a Taxpayer Identification Number (TIN) error contained in a 1095-C Schedule, in general, the IRS indicates that corrections to the 1095-C Schedules (where the TIN errors would reside) should be filed as soon as possible.  However, if the correction on the 1095-C Schedule is only for an incorrect TIN and not correcting a money amount, the correction is not required.  See IRS Pub. 1586, p. 10.  Additionally, employers filing 1095-C Schedules that contain incorrect TINs will not be subject to penalties if they comply with the TIN solicitation requirements.  See IRS Pub. 1586, p. 10 (identifying the TIN solicitation process for 1095-C Schedules modifying the process in Treasury Reg. 301.6724-1(f)).

For purposes of the employer, if there is a mismatch in the name identified in the Social Security Administration (SSA) and the IRS in a 1095-C filing, the employer could receive an “Accepted with Error” notice from the IRS.   The employer should be engaging in the TIN solicitation process to ensure names or Social Security numbers are current.

Assuming “overlooked” means failed to submit 1095-C Schedules for some employees, the employer should submit “corrected” 1095-Cs (and furnish to the applicable employees) as soon as possible along with a 1094-C. (However, do not mark as corrected unless the 1094-C form itself is being corrected).

Supporting documentation may be found in Summaries of Benefits of Coverage and Enrollment Guides, Employee Handbook, Summary Plan Documents, Employee Premium Rate Sheets and/or Acknowledgement of Offer of Coverage.

If the question is specifically focused on payroll, supporting documentation could be a spreadsheet on which relevant payroll data was downloaded to determine full-time employee status.

In order to determine “full time” under the ACA for reporting purposes, the IRS has sanctioned two methods: Monthly Measurement Method and Look-Back Measurement Method. 

Under the Monthly Measurement Method, the employer determines if an employee is a full-time employee on a month-by-month basis by looking at whether the employee has at least 130 hours of service for each month.

The Look-Back Measurement Method can be particularly useful for variable-hour, part-time and seasonal employees who have hours that are not reliably predictable.  The Look-Back Measurement Method also allows for longer “limited non-assessment periods,” whereby an offer of coverage is not required, up to 13 and change months.  However, the Look-Back Measurement Method requires close monitoring and tracking, and clean, reliable data. It requires substantial attention and expertise to navigate the rules surrounding the Look-Back Measurement Method.

The application of the Look-Back Measurement Method (LBMM) does not depend on whether the employee is determined to be full-time or part-time.  As a general rule, if an employee was determined to be part-time during the measurement period, that non-full-time status applies throughout the stabilization period (associated with the measurement period).

For a workforce that an employer cannot reasonably determine the full-time or non-full-time status of an employee at the time of hire, the Look-Back Measurement Method (LBMM) makes a lot of sense to use.  Under the LBMM, each employee is measured during a measurement period, and the full-time (or non-full-time, e.g., part-time) status determined during that measurement period (MP) is applied prospectively during the associated stability period (SP).  So, for example, if you use a 12-month MP, say 1/1/17-12/31/17 and a 12-month SP, 1/1/18-12/31/18, and an employee is determined to be full-time during the MP, that employee should be offered coverage for the duration of the SP.  This is true even if the employee does not work full-time hours during the 1/1/18-12/31/18 time period.

An employer may change the measurement method applicable to a category of employees, provided that the transition rules for employees who change between the Monthly and Look-Back Measurement methods, due to such a change by the employer, are applied to all employees impacted by the change. This is done for a transition period after the effective date of the change in method. 

For a change from the Look-Back Measurement Method to the Monthly Measurement Method (or vice versa), the status of each affected employee as of the date of the change is determined as if each of those employees had transferred from a position to which the original measurement method applied to a position to which the revised measurement method applied on the date of the change.

One relatively simple way to show that an offer of coverage was made to an employee who declined coverage would be through a copy of a signed Acknowledgement of Offer.  The form should reflect the offer of coverage to the employee and a signature line for declining the offer.

Proper notice through email may require the employee’s consent.  Assuming that there is no consent issue, if an employer uses emails to make the offer and the offer properly describes the offer, it may be sufficient to show documentation of an offer.  The answer is not clear because the IRS did not specify what documentation would qualify as sufficient documentation of an offer of coverage, leaving us only with “reasonableness” as a guideline.  

Continuous offer of coverage means an offer of coverage for every consecutive month of each reporting year.

For every month of a reporting year that an employee receives an offer of Minimum Essential Coverage (MEC) (for the employee and dependents) as well as coverage that meets Minimum Value (MV) and Affordability to the employee, that employee would not be eligible for a subsidy.

Assuming you are using the Look-Back Measurement Method (LBMM), you could exclude from the measurement period (MP) any unpaid FMLA (and any other special unpaid leaves, including unpaid leaves due to under Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), or on account of jury duty).  Here is a simple example:  Suppose you have a MP of 12 months (1/1/17-12/31/17) and a stability period (SP) of 12 months (1/1/18-12/31/18).  If an employee is on unpaid FMLA for 2 months during the MP, the calculation of that employee’s hours of service per month (which determines full-time status) would be averaged over 10 months instead of 12 months.  If the employee is determined to be full time during the MP, the employee would be entitled to an offer of coverage during the SP, i.e., the next upcoming year. 

If after accounting for special unpaid leaves of absence, an employee is still determined to have averaged less than 30 hours of service per week over the applicable measurement period, such an employee would not be treated as full time for the corresponding stability period.

PTC stands for Premium Tax Credits.  PTCs are what an individual may receive from a healthcare exchange if he or she meets certain requirements, including income, and if he or she was not offered coverage that met Minimum Essential Coverage and Minimum Value and affordability requirements.

If the terminated employee is deemed full-time for that one month, which is defined as 30 hours of service per week (or 130 hours of service per month), and he or she is not in a limited non-assessment period, that employee could trigger a penalty.  In a high-turnover environment, the Look-Back Measurement Method, using 12-month measurement and stability periods, makes a lot of sense to apply in determining full-time status.  Among its benefits is the lengthy limited non-assessment period, which allows the employer to wait to offer coverage until over a year from the date of hire.

The Letter 226J is a proposed penalty notice from the Internal Revenue Service (IRS) based on its authority under the ACA’s Employer Mandate to assess penalties under Internal Revenue Code (IRC) Section 4980H. The Employer Mandate requires Applicable Large Employers (ALEs), employers with 50 or more full-time employees and full-time equivalent employees, to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce and their dependents whereby such coverage met Minimum Value (MV) and is affordable to the employee or be subject to penalties.

You received a Letter 226J, a proposed assessment of the Employer Shared Responsibility Payment (ESRP), because you, as an employer:

• Did not offer Minimum Essential Coverage (MEC) to at least 95% of full-time employees (and their dependents) and at least one full-time employee was allowed the premium tax credit (PTC) (IRC 4980H(a)); and/or\
• Did offer MEC to at least 95% of full-time employees (and their dependents), and at least one full-time employee was allowed the PTC (because the coverage was unaffordable or did not provide minimum value, or the full-time employee was not allowed coverage) (IRC Section 4980H (b)).

No, the letter is not a demand for payment per se but, if you don’t respond in a timely manner, the IRS will send a follow-up, which is akin to a demand for payment. The Letter 226J is a proposed assessment of the Employer Shared Responsibility Payment (ESRP) because of a failure to comply with the ACA Employer Mandate. That proposed assessment becomes a final assessment if you don’t respond in a timely manner.

There are two ways to respond to the Letter 226J: (1) Agree with the proposed penalty and make a payment to the IRS, or (2) Disagree with all or part of the proposed penalty and provide the IRS with substantiation for your disagreement. You can review this infographic for more details about how to begin thinking about your response.

The response to Letter 226J is due 30 days from the date on the IRS notice.  The first page of the 226J letter identifies the response due date.

No. If the Letter 226J is ignored, the IRS will typically follow up with a Notice CP220J, Demand for Payment. The IRS cites that Notice CP220J will accrue interest on the unpaid amount if you don’t pay the full amount by the date provided in the Notice. Bottom line, you need to respond promptly to Letter 226J and CP220J if you want to avoid seeing your penalty assessments increase due to interest assessed on late payments.

Depending on how complicated the issues are raised by the Letter 226J, the question is whether you have the expertise and time to conduct an analysis of your ACA Employer Mandate compliance in order to refute the Letter 226J. 

In 2020, penalties imposed by the IRS under the ACA’s Employer Mandate can be huge.  The penalty is calculated on a monthly basis using one of the following for each month:

• An annualized $2,570 per full-time employee in excess of 30 for Applicable Large Employers (employers with 50 or more full-time employees and full-time equivalent employees, or “ALEs”) that fail to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents). This is known as the “A” penalty, because it arises under Internal Revenue Code Section 4980H(a).
• An annualized $3,860 for each full-time employee who qualifies for a Premium Tax Credit because of a failure to receive an offer of coverage or, even if such coverage is received, that offer healthcare coverage that fails to meet Minimum Value (MV) and/or is not Affordable. This is known as the “B” penalty, because it arises under Internal Revenue Code Section 4980H(b).

Yes! Trusaic can help. If your organization received notices from the IRS such as 226J, 5005A, 927CG, CP220J and/or 5699 or variations of these, we have saved companies over $500 million in the last two years.
Trusaic’s IRS ACA Audit Services use our extensive ACA knowledge, coupled with the expertise we have developed in extracting, aggregating, consolidating, cleaning, and validating the data critical to submitting responses that are Done and Done Right to successfully challenge the penalty assessments in IRS penalty notices.

It is hard to predict the likelihood of receiving an IRS Letter 226J.  We have seen employers of all sizes receive these notices and a wide range of proposed penalty assessments.  If you’ve offered Minimum Essential Coverage (MEC) to at least 95% of full-time employees and their dependents in 2015, presumably, you’d only potentially be tagged for “B” penalties (aka Section 4980H(b)), which are only triggered on a per Premium Tax Credit (PTC) employee basis.  Presumably, if you did not offer to 100% of all employees, there may be full-time employees who received a PTC and, thereby, potentially triggered a “B” penalty. 

Some employers did not receive notice prior to the IRS 226J letter, which identifies employees who received PTCs.  Without that advanced notice, the first the employer would hear about it would be receiving a Letter 226J. 

For informational purposes, there is statutory and regulatory language indicating that the 1411 certification notices must be issued by the U.S. Department of Health and Human Services (HHS) for a penalty to be assessed.  You can take a look at IRC 4980H, 42 USC 18081, 26 CFR 54.4980H-1(40); 45 CFR Section 155.410; Shared Responsibility for Employers Regarding Health Coverage (Fed. Reg. Vol. 77, No. 59 (March 27, 2012), p. 18357. 

Nevertheless, the IRS appears to have issued Letter 226J notices proposing penalties without the HHS (or an Exchange) previously having issued 1411 certification notices with respect to the employees who obtained PTCs (and thereby identified in Letter 226J).  If the IRS is challenged on this issue, as a practical matter, the IRS could potentially attempt to “cure” the potential defect by directing the HHS (or the applicable Exchange under the HHS) to issue the notice. 

As a practical matter, at the 226J response stage, it’s hard to see the IRS being receptive to such a challenge.  If an employer wants to challenge this issue, it may take a court challenge to resolve.

There are several ways the IRS can determine whether an employer did not meet the 95% offer of coverage to all full-time employees (and their dependents) threshold. 

First, and the most obvious, the IRS can rely on the employer’s representation, under penalty of perjury, that the percentage has been met. 

Second, the IRS can test an employer’s representation of percentage compliance by cross-referencing the employer’s 1094-C/1095-C schedules with the reports the agency receives from the healthcare exchanges that track the representations made by employees in their applications for Premium Tax Credits (PTCs).  For example, if an employer claims that it met the percentage compliance, but 10 of the 100 employees who were identified as full-time represented to the healthcare exchange that they did not receive such an offer, that would tell the IRS that the employer may not have met the 95%. 

Third, the IRS has announced that it is continuing to develop more sophisticated systems to determine non-compliance, and thus, the IRS may have other methods as well.

If an employer is offering Minimum Essential Coverage (MEC) to 98% of its full-time employees and their dependents, as well as coverage that meets Minimum Value (MV) and is Affordable to the employee, then that employer would not be subject to any Section 4980H penalties.  However, that does not necessarily mean that all employees would not be eligible for subsidies.  Presumably, the employee to whom an MEC, MV and Affordable offer were made would not be eligible.  We are assuming that the notice would be limited to those individuals and whereby the notice covers a period that matches the period of the MEC, MV, and Affordable offer.  Obviously, the other 2% could still be eligible for a subsidy.  Additionally, depending on your waiting periods and the existence of non-full-time employees, there may be others who may be eligible for a subsidy. 

The U.S. Department of Labor (DOL) has issued a model notice, which explains to employees that they may not be eligible for subsidies through a healthcare exchange if the employer offers coverage that meets certain standards.  See DOL’s sample “Health Insurance Marketplace Coverage Options and Your Health Coverage”.

https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/model-notice-for-employers-who-offer-a-health-plan-to-some-or-all-employees.pdf.

If your organization is unsure of how to file or is unsure of the accuracy of your ACA filings, contact us to learn how a cost-free ACA Penalty Risk Assessment can benefit you.

There are several ways the IRS can determine whether an employer did not meet the 95% offer of coverage to all full-time employees (and their dependents) threshold. 

First, and the most obvious, the IRS can rely on the employer’s representation under penalty of perjury that the percentage has been met. 

Second, the IRS can cross-reference the report it receives from the exchanges that track the representations made by employees in their applications for Premium Tax Credits (PTCs) through the healthcare exchange with the employer’s 1094/1095 Schedules to test an employer’s representation of percentage compliance.  For example, if an employer claims that it met the percentage compliance, but 10 out of the 100 employees who were identified as full-time represented to the exchange that they did not receive such an offer, that would tell the IRS that the employer may not have met the 95%. 

Third, the IRS has announced that it is continuing to develop more sophisticated systems to determine non-compliance, and thus, the IRS may have other methods as well.

If you are an employer that does not meet the definition of “Applicable Large Employer” (ALE), then the Employer Mandate does not apply to you, and you do not need to offer coverage to avoid IRC Section 4980H penalties.  However, if you are an ALE, then you do need to offer coverage.  If you are an ALE, but do not offer coverage, you still need to file the 1094-C and 1095-C Schedules and distribute the 1095-C Schedules to your employees.  If you are not offering coverage, there are specific codes that you will be inputting to reflect that.

The IRS may be aware of ALEs who failed to file.  We have seen notices that the IRS sent to employers who did not file any 1094/1095 Schedules inquiring as to whether they are ALEs.  The IRS appears to have the means to know whether an employer might be an ALE.  For example, the IRS has the W-2 count, and may be using that as a proxy for potential ALE status.  Moreover, the IRS receives information from the exchanges that tracks the representations made by employees in their applications for PTCs.  This information may be used as a proxy for potential ALE status.  If the IRS inquires of the employer, the employer will have to substantiate that it is not an ALE.

Potentially.  An employer filing 1095-C Schedules that contain incorrect TINs will not be subject to penalties if they comply with the TIN solicitation requirements.  See IRS Pub. 1586, p. 10 (identifying the TIN solicitation process for 1095-C Schedules modifying the process in Treasury Reg. 301.6724-1(f)).  The employer should be engaging in the TIN solicitation process to ensure names and SSNs are up to date.

Yes. The Letter 226J notice proposes penalty assessments based on the coding reported by the employer.  Inconsistency in the coding may result in penalty assessments.

We have not heard of an Applicable Large Employer (ALE) receiving a Letter 226J based, at least in part, on an employee for whom the ALE previously responded to a Marketplace Notice.  Indeed, the Letter 226J notice appears to be sent largely without any prior Marketplace Notice.  Presumably, if the ALE was able to defend against a Marketplace Notice to show that the employee(s) at issue should not have received any Premium Tax Credits, no ensuing Letter 226J should follow.  Our experience has been such that where our clients defended against a Marketplace Notice, no ensuing Letter 226J followed.

Yes, because most companies do not have the human resources needed to devote to ACA reporting let alone the technological and compliance expertise to properly conduct ACA reporting. 

Failure to do so properly can result in significant financial exposure. These include steep penalties for:

• Failure to offer coverage to at least 95% of the full-time workforce and their dependents, which requires the accurate determination of who is “full time” under the ACA definition. This can be very challenging for those companies who have related companies or have a variable/part-time workforce and/or high turnover, just to name a few complications.

• If you do offer coverage to at least 95% of the full-time workforce, but failure to provide coverage that meets affordability and Minimum Value requirements.

• Failure to report accurately and timely information on the 1094-C/1095-C forms, the latter of which must be furnished to full-time employees and other applicable individuals (e.g., dependents for self-insured employers), as well as be filed with the IRS.

The phrase “full service” can mean different things to different people. ACA vendors provide services along a continuum. There are companies with “full service” DIY software products on one end of the spectrum, and companies like Trusaic that offer full-service technology empowered by consulting expertise on the other end of the spectrum. The Trusaic approach acts like an internal department of your company focused on addressing ACA compliance.

Vendors on the “full service” DIY software end of the spectrum will generally not perform or provide the following services:

• Annual Aggregated Employer Analysis
• Annual Applicable Large Employer Analysis at the Aggregated Employer Group Level
• Annual Workforce Composition Examination, for purposes of determining optimal ACA FT determination methodology
• Annual Health Benefits “Plan Level” examination:
  • Verification and documentation of Minimum Essential Coverage and Minimum Value
  • Verification and documentation of Household Eligibles
  • Verification and documentation of Waiting Periods
  • Verification and documentation of Employee Health Insurance Premium Contribution Schedules
  • Determination and documentation of “Line 15 Contributions Groups”, inclusive of adjustments that may be required to account for HRA’s, Flex Credits/Cafeteria Amounts, Wellness Plans, Fringe Benefits, Opt-Out Payments.
  • Determination and documentation of Affordability
  • Determination of line 15 for employers with individually structured employee contributions schedules
• Assistance in selecting the optimal measurement periods dependent on (a) data availability, (b) health plan details, (c) and workforce composition
• Employment Period reconciliation. (Reconciling accrued Hours of Service and Wages against raw Hire/Term dates to arrive at an accurate “ACA Employment Period” determination”).
• Supporting Documents Compliance Percentage %. (Visibility not just into the 4980H compliance percentage, but just as importantly, the percentage of the claimed offers of health coverage that can be substantiated in the event of a regulatory inquiry).
• Payroll Data vs Health Benefits data validation and reconciliation. (Average discrepancies between these data domains hover around 5-10%. Failing to reconcile data can lead to expensive IRC 6721/6722 penalties).
• Health insurance invoice auditing
• Pre-populated “Acknowledgement of Offer of Health Coverage” forms
• A dedicated Workforce Analyst that serves as a permanent ACA Project Manager, Data Expert, and Consultant, not just through the onboarding process, but also throughout the entirety of the ACA reporting cycle. For instance, FCCI offers:
  • Proactive personal follow-up if anything looks out of order or if critical action items have not been resolved.
  • Exceptionally quick responsiveness to technical/methodological ACA questions.
  • A World-Class Net Promoter Score and an average score of 9.3 out of 10 on customer satisfaction.
• Exchange Notice and Appeals coordination and Audit Defense in the event of an IRS audit or other regulatory inquiry.

This really depends on the thoroughness of the statement that supports the ESRP response. With statements provided for our clients, the IRS has not followed up with supporting information requests. However, it may very well be because the statements submitted are very thorough in explaining the basis as to why the ESRP should not have been assessed against the client (including the applicable IRS rules and the calculation methodology) and expressly indicating that supporting documents are available for IRS review. In other words, the statement strongly signaled to the IRS that the client was right in challenging the proposed ESRP, and that following up with a request for supporting documentation would only show that the client was right. 

We have also seen the IRS simply reject ESRP Responses (as opposed to requesting supporting documentation) where the ESRP Responses were supported only by conclusory client statements. (We did not assist in these ESRP Responses.)

To conduct an initial ACA penalty risk assessment, we would need to look at the client’s 1094/1095 schedules and may need to engage in an initial onboarding call to gather some basic information.

If the Health Insurance Marketplace (aka the Exchange) confirms that it agrees with the client’s timely challenge of a notice (or multiple notices if applicable for a given reporting year), the Exchange would not be sending a notice to the IRS. While it is possible that there could be an error, the IRS would not send a notice.

We have seen extensions requested in writing and via telephone. Either way, if you get the extension, you should memorialize the extension in writing.

If the IRS sent you a Letter 226J letter and you did not respond in a timely manner, the IRS will follow up with a demand letter.

There is no requirement that you do so, and all related entities as defined by the IRS rules for ACA reporting purposes, aggregated to less than the Applicable Large Employer (ALE) threshold. You will want to make sure you are properly grouping all related entities and properly counting full-time and full-time equivalent employees as required to determine ALE status.

If you don’t meet the ALE threshold, while you are not required to file information with the IRS, there is no prohibition from doing so.

Based on prior history, the answer appears to be no. We have seen IRS Letter 226J notices for the 2015 year without any prior notices from the Exchange.

An employer’s obligation to offer coverage does not change because the individual chooses to decline such coverage in favor of coverage through the Exchange. The key is that the employer makes the offer, not that the employee accepts the offer.

We are not sure what is meant by “credit changes due to employment.”  If an employer offers a healthcare plan to an employee and their dependents, and the coverage to the employee is affordable and meets Minimum Value, then the employee would not be eligible for Premium Tax Credits (PTCs) from the Exchange. If the employee’s household income changes due to employment, that could affect the amount of an employee’s otherwise eligibility for PTCs. So, for example, if the employer did not offer the required healthcare coverage to a recent hire who has healthcare coverage on the Exchange, that employee’s eligibility for PTCs remains, but may get reduced in amount due to an increase in the employee’s household income through the wages from the employer. However, by virtue of receiving PTCs, regardless of the specific amount, the employer remains at risk of Section 4980H penalties.

Regardless of whether an employee is seasonal or otherwise, if the employer offers a healthcare plan to an employee and their dependents and the coverage to the employee is affordable and meets Minimum Value then the employer’s risk of Section 4980H penalties with respect to that employee is eliminated. Please note that while waiting periods are permissible, they must comply with the 90-day cap starting from the date of hire.

If at the time of hire, the employer offers a healthcare plan to an employee and their dependents and the coverage to the employee is affordable and meets Minimum Value then the employer’s risk of Section 4980H penalties with respect to that employee is eliminated.

Yes. The IRS has indicated that corrections should be submitted promptly.

The IRS may respond to an employee who improperly received a PTC by clawing back the PTC through that employee’s tax return.

Yes. ACA Compliance is one of our areas of expertise.. We have provided ACA compliance assistance to hundreds of clients since the inception of the ACA.

That would be a good rule of thumb. One thing to note is the IRS’s statute of limitations does not begin if an employer never filed its 1094/1095 forms for a given tax year. So, theoretically, the IRS can pursue penalties for a given tax year indefinitely if the employer doesn’t file the 1094/1095 forms for that year.

The ACA Times provides some useful resources. Please check them out at https://acatimes.com/

If you, as the employer, offered a healthcare plan to those employees and their dependents and the coverage to the employees was Affordable and meets Minimum Value, but you have proof (waivers) that those employees declined such coverage, you can appeal the letter with a written response including copies of those waivers.

Please note that you have 90 days from the date of the letter to appeal.  

The employer appeals process is handled through healthcare.gov. It is described at this link: https://www.healthcare.gov/marketplace-appeals/employer-appeals/

The appeals form is available on www.healthcare.gov/marketplace-appeals/appeal-form-instructions/

The employer appeals process is handled through healthcare.gov. It is described at this link: https://www.healthcare.gov/marketplace-appeals/employer-appeals/

The appeals form is available on www.healthcare.gov/marketplace-appeals/appeal-form-instructions/

The address is on the form.

Please note that you have 90 days from the date of the letter to appeal. 

Lines 14 and 16 on the 1095-C form is where the 1 and 2 series codes would be identified and is done on a month-to-month basis. We would need additional facts about each employee to provide the specific proper code (whether the offer was a qualifying offer, whether the offer was made to the employee, spouse and/or dependents, whether the offer met Minimum Value, whether the offer was affordable to the employee and under which safe harbor, the full-time or non-full time status of the employee, whether the employee was in a limited non-assessment period, whether the spouse was offered conditionally, etc.). 

 The coding rules are detailed in the IRS Instructions. See e.g., https://www.irs.gov/pub/irs-pdf/i109495c.pdf(for the 2018 year). If the employee is an ongoing employee, the fact that the offer for coverage throughout the plan year is made only at the time of open enrollment or qualifying event would not change the fact that the offer remains an offer for each month of the plan year. If the employee is a new employee, that employee would need an offer within the waiting period.

If part of an Aggregated ALE Group, the FT count for purposes of determining whether the “at least 95%” of the FTs and their dependents (for reporting years other than 2015) is determined for each individual company EIN (Employer Identification Number). In terms of the 30 allocated reduction of FTs, that is ratably allocated among the group.

The former employee is not required an offer of coverage by the company because the former employee is not an employee. There is an issue as to whether that former employee, who is now an “independent contractor,” will be deemed an employee notwithstanding the “independent contractor” status.  Assuming that the former employee will be treated as an “independent contractor,” and not as an “employee,” then the company is not obligated to make an offer of coverage.   This is true regardless of the hours worked by the former employee as an “independent contractor.”

The times vary, but the IRS typically responds within 90 days.

A screen print from the technology system used to submit the filing to the IRS AIRS portal that shows the filing Receipt ID, Acknowledgement Status, and filing date and time should be sufficient.

Not yet. New Jersey has issued information for employers on third-party reporting to support the state’s new individual healthcare mandate.

California has also enacted its own individual mandate to take effect on January 1, 2020.  In connection with the state’s individual mandate, California intends for certain employers to report to the California’s tax agency, the Franchise Tax Board.  The specifics of the reporting have not yet been finalized.

Here are links to some helpful information on this topic:

https://acatimes.com/california-passes-new-state-wide-healthcare-individual-mandate/

https://acatimes.com/new-jersey-issues-employer-guidance-on-state-level-aca-reporting/

There are various grounds to challenge the penalties proposed in the Letter 226J.  Without more facts, it is hard to identify what particular grounds might apply.  For example, let’s assume that an Applicable Large Employer (ALE) has employees with over 30 hours of service per week and were not offered coverage.  If the ALE nevertheless offered minimum essential coverage to at least 95% of its full-time employees (and their dependents), and these employees who were not offered coverage fall within that remaining 5%, there would be no IRC Section 4980H(a) penalty.  With respect to an IRC Section 4980H(b) penalty, if those employees fell into “limited non-assessment periods,” then, notwithstanding no offer of coverage, those employees would not be able to trigger any IRC Section 4980H(b) penalty.  We are certainly happy to discuss all of the specific facts that apply to your company’s situation to identify the potential grounds to challenge the Letter 226J.

Industries with high turnover/hourly rate employees are good candidates for the Look Back Measurement Method (“LBMM”). This method allows the employer to potentially provide for more than a one-year “initial measurement period” which would allow an employer to not offer coverage for that more than one-year period. This can be very helpful for high turnover industries, where employees often don’t even last a year.  The rub with the LBMM is that it requires vigilance on a monthly basis to keep track of full-time status and when offers of coverage become due. Failure to timely offer coverage will wipe away the value of the initial measurement period!  We can manage that time-consuming process for you. 

Some employers choose to avoid implementing the Look-Back Measurement Method for fear of the complexity involved, but this can result in adverse effects to the organization and employees in two ways:

• The organization ends up incurring unnecessary healthcare expenses that impact the bottom line, because they offered health coverage to individuals who enrolled on their health plan that they did not “need to” from an ACA Employer Mandate perspective.

• Part-time employees who did not require an offer of health coverage from their employer but who were offered health coverage nonetheless are prevented from being able to obtain Premium Tax Credits from their state or federal exchange to obtain potentially better coverage than offered through the employer sponsored plan. This can have a negative impact on the employees and their dependents.

Until further guidance is issued, an employer of employees who have on-call hours are required to use a reasonable method for crediting hours of service that is consistent with IRC Section 4980H. The IRS Final Regulations specify that: “It is not reasonable for an employer to fail to credit an employee with an hour of service for any on-call hour for which payment is made or due by the employer, for which the employee is required to remain on-call on the employer’s premises, or for which the employee’s activities while remaining on-call are subject to substantial restrictions that prevent the employee from using the time effectively for the employee’s own purposes.” 

We assume that the reference to the “one-year measurement period” means that you are using the Look-Back Measurement Method (LBMM).  To the extent that an ALE member seeks to apply different measurement and/or stability periods for different categories of employees, the IRS Final Regulations require the employee categories to be reasonable and consistent.  The IRS Final Regulations provide examples including (a) salaried versus hourly, (b) employees in different locations, (c) collectively bargained employees and non-collectively bargained employees.  It is not clear from the IRS Final Regulations that on-call versus non-on call would be permissible employee categories.

A one-year (12 month) Standard and Initial Measurement Period is the maximum permissible measurement period length under the ACA Employer Mandate.

Your regulatory compliance manager will need to determine that.  States like California has its own “individual mandate” in place, and along with that “individual mandate,” California will be requiring employers to provide employer mandate type reporting to the state, in addition to that required by the IRS.  To the extent that states have not yet imposed such additional obligations, the trend is towards moving in that direction.

Here is some helpful information on this topic:

https://acatimes.com/will-2019-be-the-year-for-statewide-individual-health-insurance-mandates/

https://acatimes.com/california-passes-new-state-wide-healthcare-individual-mandate/

 https://acatimes.com/new-jersey-issues-employer-guidance-on-state-level-aca-reporting/

If an Applicable Large Employer (ALE) has employees who had more than 30 hours per service per week, but then their hours decreased such that they were working less than 30 hours of service per week, whether the ALE needs to continue to offer coverage depends on which method the ALE was using to measure the hours.  If the ALE was using the Look Back Measurement Method, and if those employees were full-time (at least 30 hours per week) during the measurement period, it doesn’t matter whether those employees had lesser hours during the stability period.  Such employees will be required to be offered coverage to avoid penalties to the ALE.  Of course, if an employee who is non-full-time during the measurement period is nevertheless enrolled in coverage during the stability period, there is no employer mandate penalty.  An employer can always offer coverage even if not obligated to do so.

With respect to rehire dates, there are certain rules under the Look Back Measurement Method (LBMM) to determine whether the initial hire date or the rehired date counts.  For non-educational organizations, the “rehire” date is treated as an initial hire date if the gap in employment is at least 13 weeks.  If the gap is a result of special unpaid leave rules, e.g., jury duty, USERRA or FMLA, then the gap does not count.  Accordingly, if the gap is at least 13 weeks and not due to special unpaid leave, then the employee is treated as a new hire, and his or her initial measurement period is based on the “rehired” date.

If you are using the Look Back Measurement Method (LBMM), the fact that an employee’s hours are reduced during the stability period cannot change his or her full-time status determined during a measurement period.  If you are using the Monthly Measurement Method, and assuming your policies and plan documents otherwise permit, you are not required to offer coverage if the employee is determined to be non-full-time.

The Look Back Measurement Method (LBMM) does not allow for a 60-day measurement period.  The shortest is three months and the longest is 12 months.  Under the LBMM, during the measurement period, you would look at the employees’ hours of service. If, during the measurement period, an employee averages to less than 30 hours of service per week or 130 hours of service per month, then that employee need not be treated as full-time during the stability period associated with that measurement period.  The LBMM is a tricky method, but can be beneficial for variable-hour employees, who often turn over prior to the end of their initial measurement periods.  Under the LBMM, if employees terminate during their initial measurement period, the failure to offer coverage is not penalized under IRC Section 4980H.

Whether an employer appeals an employee’s APTC determination or not, the employer can still challenge the IRS assessment when it issues the Letter 226J.  That may have been what the State of Washington meant.  So, if any employer does nothing in response to an APTC determination, the employer gets another “bite of the apple.”  That said, if an employer can resolve the issue at the state exchange level to conclude that the APTC determination was in error, then no Letter 226J should result from that APTC determination.  Accordingly, it makes sense to address at the state exchange level if possible.

An employer with a self-insured plan has additional obligations to report even if the employer is not an ALE.  As you aptly noted, these additional obligations include dependent information in Part III of Form 1095-C and completion of the accompanying 1094-C.  Of course, if the employer is an ALE, all of the information that an ALE must provide is also required.

Letter 5005A is a penalty notice from the IRS that, along with Form 886A, assesses penalties under IRC Sections 6721 and 6722, which are the penalty provisions for failure to file forms 1094-C/1095-C and for failure to furnish Form 1095-C to applicable individuals.

"There are some conflicting instructions in the technical specs provided by DC's OTR website.  See https://otr.cfo.dc.gov/node/1447081.  

The one pertaining to the layout clearly indicate that a numeric field is required for age.  See https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/1094B%2C 1095B%2C 1094C%2C and 1095C 2021  Layouts - Changes Highlighted in Orange.xlsx (at Tab 4, Row 51) (indicating that a ""Numeric"" value for employee age is ""Required"").  However, another excel instruction indicates that while no numeric value is required, an input of a space is required, suggesting that age is not required.  See https://otr.cfo.dc.gov/modules/file/icons/x-office-spreadsheet.png (at Row 68).

So the instructions are conflicting. That said the employer will have age information on the employees so it may be the safer move to include age.  However, if you already filed and didn’t put age in, you could use https://otr.cfo.dc.gov/modules/file/icons/x-office-spreadsheet.png as a potential reference. "

Generally, state ACA reporting depends on whether you have employees in those states, and not whether you have a physical office in those states.

You will need to check whether you have employees in each of the applicable jurisdictions.  California, New Jersey, D.C., and Rhode Island appear to require reporting even if you have just one resident employee.  Massachusetts has its own unique rules.

Under the ACA, there is only one Look-Back Measurement Method. However, there are specific rules as to the duration and start/end dates for the specific Measurement Periods, Stability Periods and/or Administrative Periods.

"Rhode Island requires all employers offering MEC to Rhode Island resident employees to submit state level reporting to track compliance with SRPP by residents. Employers and health sponsors providing MEC to an individual will be required to file a return with the Division of Taxation (DOT) and provide a return to the individual.This reporting requirement is an additional requirement to the Federal ACA Employer Mandate (requirement to furnish Forms 1095-C to employees and file with the IRS [along with Form 1094-C]). Fully insured employers can avoid reporting if their insurer complies

.Compliance with the IRS furnishing requirement satisfies the RI furnishing requirement.

Note: no underlying obligation to offer coverage unlike the Federal ACA requirements. For the 2020 year, the furnishing deadline of January 31, 2021 was extended to March 2, 2021.   The filing deadline to RI’s Dept of Revenue, Division of Taxation (DOT) is March 31, 2021.

Corrections will be accepted until December 31 of the filing year.

Employers failing to report may be subject to a penalty, which is “reviewed on a case by case basis and addressed as its unique facts and circumstances warrant.”

Yes

The forms that must be filed varies from state to state.  In several cases, the Federal forms can be used.

Yes

Depends on the jurisdiction.  For example, if you are in DC, even if you are fully insured, if you otherwise meet the requirements, you will need to file.  In contrast, CA and NJ does nor require you to file in your insurer files for you.

That is the concern. For example, both in CA and NJ refer to the insurer filing but that does not necessarily relieve the obligation on the employer if the insurer fails to do so.

If you are a fully insured employer, you should not be completing 1095-B.  Employers to use that form are self-funded employers.

"There are some conflicting instructions in the technical specs provided by DC's OTR website.  See https://otr.cfo.dc.gov/node/1447081.  

The one pertaining to the layout clearly indicates that a numeric field is required for age.  See https://otr.cfo.dc.gov/sites/default/files/dc/sites/otr/publication/attachments/1094B%2C 1095B%2C 1094C%2C and 1095C 2021  Layouts - Changes Highlighted in Orange.xlsx (at Tab 4, Row 51) (indicating that a ""Numeric"" value for employee age is ""Required"").  However, another excel instruction indicates that while no numeric value is required, an input of a space is required, suggesting that age is not required.  See https://otr.cfo.dc.gov/modules/file/icons/x-office-spreadsheet.png (at Row 68). 

So the instructions are conflicting. That said the employer will have age information on the employees so it may be the safer move to include age.  However, if you already filed and didn’t put age in, you could use https://otr.cfo.dc.gov/modules/file/icons/x-office-spreadsheet.png as a potential reference."

Yes

No, so long as the insurer submits the state reporting on your behalf.

This is located on the FTB Instructions. See https://www.ftb.ca.gov/forms/2020/2020-3895b-publication.pdf and https://www.ftb.ca.gov/forms/2020/2020-3895c-publication.pdf.