LETTER 226J
BY : BARRY FIELDS , VICE PRESIDENT OF EMPLOYEE BENEFITS , JGS INSURANCE
Employer Mandate Requirements
Letter 226J
The Internal Revenue Service ( IRS ) has begun to notify employers via a letter ( Letter 226J ) containing several attachments that a company may owe a penalty for failing to comply with the employer mandate requirements for the 2015 calendar year under the Affordable Care Act ( ACA ). The letter begins as follows : “ WE HAVE MADE A PRELIMINARY CALCULATION OF THE EMPLOYER SHARED RESPONSIBILITY PAYMENT ( ESRP ) THAT YOU OWE .”
If you receive such a letter , don ’ t panic ! This is just the first step in assessing an employer mandate penalty . The IRS ’ s determination of whether an employer may be liable for a penalty and the amount of the potential payment is based on information reported to the IRS on Forms 1094-C and 1095-C for 2015 ( filed in early 2016 ) and the IRS ’ s records of whom received a premium tax credit . If the IRS determines that , for at least one month in the year , one or more of the employer ’ s full-time employees received a premium tax credit and the employer did not satisfy the offer-of-coverage rules , Letter 226J will be mailed to the employer . It will include :
• a brief explanation of the employer mandate provisions ;
• a summary table itemizing the proposed payment by month and indicating whether liability applies for each month and , if so , whether it ’ s for the A penalty or the B penalty ;
• an explanation of the summary table ;
• a response form ( Form 14764 : ESRP Response );
• an employee premium tax credit listing ( Form 14765 : Employee Premium Tax Credit [ PTC ] Listing ) which lists , by month , the employees who received a PTC that triggered the letter ;
• the actions the employer should take if it agrees or disagrees with the proposed penalty ; and
• the actions the IRS will take if the employer does not respond in a timely manner .
Our greatest concern about the employer mandate is an employee who waives your coverage and receives a subsidized individual policy from the Marketplace Exchange when the employee was not entitled to one . Since we believe this is a common mistake , do not panic . It will take some effort to avoid the penalty , but in the end , you are safe if the medical program offered by your company met the “ Minimum Value ” and the “ Affordability ” requirements for all full-time employees . +
Barry Fields has over 26 years of employee benefits experience advising clients in a wide range of industries , professional and industrial , public and private , throughout the United States and worldwide .
Barry specializes in providing full-service benefits consulting to clients including program design , compliance , plan funding , underwriting , wellness programs , employee communications , benefits administration , employee advocacy and the use of effective strategies in benefits management .
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