Another Round of ACA Non-Compliance Letters is Looming

Cue the “Jaws” movie music, because the penalties are coming. Thursday, July 11th, on the monthly IRS Payroll Industry call, the IRS continued to communicate that ACA compliance activities continue, including non-compliance letters, despite legislative and judicial challenges. One example is Texas v. United States which argues that the Affordable Care Act (ACA) individual mandate is invalid without a “tax” or penalty amount. This case is expected to go to the Supreme Court, but not until after the next presidential election.

During the IRS call, it was stated that they are actively working on 2017 ACA enforcement actions. As such, there will be ACA non-compliance letters going out for non-filing activities and Employer Shared Responsibility Provisions.

• Non-Filing Activities: The IRS identified 8,752 cases of potential non-filing. Employers with at least 50 W-2s who didn’t send in any 1095-C forms may receive a non-filing letter. As we shared in a blog from March of this year about the 2016 non-filing letters, it is important to act right away! Be sure to respond to IRS Letter 5699 within the 30-day window. Also be sure to include any supporting documentation that may be requested with your response. If you have additional questions about the letter, employers can call the contact number listed on the top right corner of the letter.

If you are an employer who was non-compliant, it’s decision time. You will need to decide what level of risk you are willing to take and if you are able to financially handle that kind of hit, should it happen.

• Employer Shared Responsibility Provisions (ESRP) Letters: The ESRP letters, also known as Letter 226J, will begin to be distributed to employers in July. There are approximately 50,000 employers that will be receiving a 226J for 2017. The IRS expects to send between 23,000 and 29,000 letters this month to employers that filed the 1095-C and as a result, may be subject to an ACA penalty for failure to offer coverage timely and/or for failure to offer compliant coverage. The rest are likely to be delivered in August.

In the majority of the cases in which we helped employers respond to a 226J letter, it was simply an error made in reporting and the entire assessment was waived after the employer made a timely response. The most important thing to remember if you get a 226J Letter is to remain calm and follow the instructions we’ve shared on this in the past.

Wondering if any of these letters could be coming for you? Use our free ACA Employer Penalty Calculator to see if your company could be at risk.

Keep in mind that Integrity Data is here to help you every step of the way with your ACA reporting needs. Please contact us if you have any questions staying in compliance, or, if you are new to the ACA employer requirements. We will work hard to keep the sharks (non-compliance letters) away...duuunnn dun...dun dun.

By Tom Franz - Client Engagement Director, Integrity Data