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IRS to Enforce ACA Employer Mandate


Recent guidance from the IRS states that it will begin enforcing the Affordable Care Act’s (ACA) Employer Shared Responsibility Provision and impose Employer Shared Responsibility Payment (ESRP) on noncompliant employers.  The process is described in Letter 226J which serves as notification to the employer of a potential penalty.  Letters from the IRS for the 2015 calendar year ESRPs will be mailed as soon as late 2017.

 As a reminder, ACA’s Employer Shared Responsibility Provision encourages applicable large employers (ALEs) to provide affordable, minimum value health coverage to avoid potential penalties.  ESRPs are triggered when a full-time employee receives a premium tax credit, i.e. subsidy, to purchase insurance through the Exchange/Marketplace.

2015 annual penalty amounts (assessed monthly):

  • $2,080 per full-time employee (minus the first 80) -- when an employer did not offer Minimum Essential Coverage (MEC) to at least 70% of their full-time employees and dependent children
  • $3,120 for each full-time employee who received a subsidy through the Exchange/Marketplace -- when an employer offered a health plan that did not meet minimum value and affordability standards

Upon receipt of Letter 226J from the IRS, next steps generally include the following:

  • Review the letter for the proposed ESRP amount, a list of the assessable employees and their 1095-C indicator codes (lines 14 and 16), IRS contact for questions, and next steps
  • Respond to the IRS by the deadline stated on the letter (generally within 30 days of the letter date) either agreeing or disagreeing with the proposed ESRP assessment
  • Receive Letter 227 from the IRS acknowledging the employer’s response and providing additional action items
  • Request a pre-assessment conference with the IRS Office of Appeals if appropriate when an employer disagrees with the ESRP amount – See instructions in Letter 227 and Publication 5 “Your Appeal Rights and How to Prepare a Protest if You Don’t Agree” including applicable deadline (typically 30 days from the date of Letter 227)
  • Receive Notice CP 220J from the IRS with payment instructions for the liable amount – See Publication 594 “The IRS Collection Process” for payment options
  • Pay amount due

View IRS FAQ Guidance

View Letter 226J

View Summary for additional information