ACA Penalty Relief

The ACA requires employers to offer health care insurance that is affordable and provides minimal value to at least 95%of their full-time employees and children up to the end of the month in which they turn 26. Employers may be subject to penalty for not completing the requirements mandated.

This is the penalty the IRS imposes on an employer to fails to offer at least minimum coverage to at least 95% of eligible employees and their dependents.

This is the penalty the IRS imposes for failure to provide affordable, minimum value coverage to an employee.

The IRS offers 3 Safe harbors to choose from to determine affordability. Safe Harbors are used to determine the code in Line 16 on the 1095-C form when an employee waives coverage.

1. FPL (Federal Poverty Line)
   1. An employer should only set up this safe harbor if the employee share of the LCP (Lowest Cost Plan) is at or below the current Federal Poverty Line amount.
   2. If an employer chooses this safe harbor and the employee share is above the FPL, your plan will always be unaffordable. This will be reflected on the codes on the 1095-C.
2. ROP (Rate of Pay)
   1. There are two different methods for determining affordability with the ROP Safe Harbor – one for hourly and one for non-hourly employees:
      1. Hourly Employees
         1. Affordability is determined based on the hourly rate “as of the first day of the coverage period” (generally the first day of the plan year) or the employee’s lowest hourly rate of pay during the calendar month.
      2. Non-Hourly Employees
         1. The employee’s monthly salary, as of the first day of the coverage period, is used to determine affordability. Changes to this amount during the tax year also need to be reported as they may affect affordability.
         2. NOTE: If the monthly salary is reduced during the coverage period, the rate of pay is not available for the months where it is lower
3. W-2 Federal Wages (Box 1)
   1. This safe harbor will compare your plan cost(s) from your LCP to each employee’s Federal Wages.

• The IRS reviewed your W-2’s for the tax year in question.
• You are deemed to be an ALE (Applicable Large Employer) in the eyes of the IRS.
• This letter is a precursor letter asking employers to confirm their filing details for a specific tax year before sending employers a penalty notice.
• This is the employer’s opportunity to provide the IRS with information as to why or to file if necessary.

One or more of full-time employees received a PTC (Premium Tax Credit from a state or federal health exchange for one or more months.

No. The ACA has no statute of limitations. Meaning the IRS can theoretically come back on a business at any point in time and require proof of ACA compliance for the tax year in question.

Yes. We can perform a retroactive audit of your HR data and create a penalty letter response for you. At the same time we can develop an ongoing ACA tracking process to prevent future penalty letters.