Although the employer mandate under the Affordable Care Act isn't new, this is the first year that the IRS is attempting to collect penalties from companies that didn't shell out—for violations incurred in 2015.
But according to a report in Modern Healthcare, they may have a fight on their hands. The penalty, which helps fund the ACA, is assessed if a company with at least 50 full-time employees didn't offer minimum essential coverage to at least 70% of its workers and their dependents, and at least one employee was eligible for an advanced premium tax credit.
In addition, companies that offered the option of a qualified plan to at least 70% of their full-time workers and their dependents are also on the hook for the penalty if a full-time employee couldn't afford the offered plan and qualified for an advanced premium tax credit.
But there could be grounds for a legal challenge, according to the report, and most companies sent IRS assessments of their mandate penalties are appealing them. The reason? Companies are arguing that federal and most state exchanges haven't followed the rules set out in the ACA statute and regulations and therefore can't levy the 2015 fines.
And those fines are pretty hefty. The report cited one letter from the IRS that assesses “a penalty of more than $3.8 million. The company in question received the notice on Nov. 8 and had 30 days to respond with the money owed or evidence that the IRS was wrong about the penalty.”
ACA regulations said that exchanges, not the IRS, were supposed to send employers certified notices regarding which of their employees enrolled in an exchange plan subsidized by a premium tax credit for one month or longer. Only three state-based exchanges—from Maryland, Connecticut and Washington state—sent certifications for 2015. And according to health law consultant Chris Condeluci, cited in the report, since most exchanges didn't send notices, it could mean that they didn't have a system in place to do so.
According to Condeluci, the report says, employer groups are seriously considering legal action while waiting for Congress to pass a retroactive repeal of the penalty.
Some companies were exempted in 2015, with the government viewing it as a transition year, and some of those exemptions under transition regulations extended into 2016. But if the penalty isn't repealed, all employers will be on the hook in 2017. And considering how dubious it is that Congress will get a move on—especially without Democratic support, as how to pay for the repeal is an ongoing discussion—there's no way to know when, or if, existing bills aimed at repeal will be brought to a vote.
From: BenefitsPro
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