By Rich Hines
As 2016 draws to an end, it’s important to prepare for upcoming changes to the Patient Protection and Affordable Care Act (ACA). To remain in compliance with the law and avoid tax penalties, there are several details about ACA marketplace notices, appeals, forms, and new ACA reporting deadlines of which you’ll need to be aware.
Health Insurance Exchange Notices
Under the ACA employer mandate, employers with 50 or more full-time employees must offer affordable, comprehensive health benefits coverage to full-time employees and their dependents or potentially pay a tax penalty. If your full-time employee receives subsidized coverage at either the federal or a state-based health insurance exchange, your company may be in violation of the employer mandate and might be liable for taxes penalties.
Both the federal and state-based exchanges are required to notify employers (and the IRS) regarding each employee who obtains subsidized coverage. It’s important to be prepared to act quickly in case you do get a notice. Employers only have 90 days to appeal a subsidy award after receiving an exchange notice. If you receive a notice, you may use the federal Employer Appeal Request Form to file an appeal within 90 days of the date on the notice. This form can be used to appeal notices from the federal health insurance exchange (Healthcare.gov) as well as the California, Colorado, Kentucky, Maryland, Massachusetts, New York, Vermont, and Washington D.C. exchanges. In addition to lowering the employer’s chances of incurring a tax penalty, an appeal may also help the employee by limiting the amount of an unexpected and unwelcome tax subsidy clawback in the future.
Appeals need to include adequate documentation to explain why an employee doesn’t qualify for coverage or subsidy.
Possible explanations include:
• The employee did not qualify for health benefits.
• You offered the individual qualifying coverage, but the employee waived coverage and did not enroll.
• The individual was hired through an employment contracting company or was never your employee.
• The exchange notice was sent to you by mistake.
Proper documentation includes:
• Payroll records.
• A signed waiver of the health benefits coverage form.
• A copy of enrollment and eligibility rules documents provided to the employee.
A successful appeal at the exchange level may not by itself release you from the Employer Mandate tax penalty — only the IRS can make that determination. The marketplace notice merely provides a warning regarding potential tax liability. Filing an appeal with a health insurance exchange will not prevent the IRS from requesting the same information at a later date. Even if you win the appeal with the exchange, you may still have to prove to the IRS that you made a qualifying offer and are not subject to a tax penalty.
If you lose your appeal with an exchange, you will have a second chance to dispute the issue with the IRS, since they are the agency that evaluates the facts and levies employer mandate penalties. The IRS may be more inclined to examine all of the reasons why an employee may not qualify for coverage, beyond the exchange’s focus on whether or not you made qualifying offer of coverage.
New ACA Reporting Deadlines
Please note that there are strict deadlines for processing 1094-C and 1095-C forms, including furnishing 1095-C forms to your employees by January 31, 2017, filing by mail by February 28, 2017, or e-filing by March 31, 2017. Each individual entity under a corporate umbrella needs to file its own 1094-C and 1095-C forms.
For more information about the exchange notices, ACA reporting requirements, and offering affordable, qualifying health benefits coverage to avoid ACA tax penalties please feel free to contact me at [email protected] or (949) 379-3852.