Affordable Care Act (ACA) compliance remains a requirement for qualifying employers irrespective of the repeal of the individual mandate. More importantly, the repeal of the individual mandate does not repeal the employer mandate. ACA regulations still require employers to offer qualifying health insurance to a minimum number of full-time employees.
If your company received IRS letter 226J in late December, that likely means the IRS determined your company was not in compliance with ACA provisions during a previous tax year. It is imperative that your payroll department not ignore this letter. Action must be taken in order to prevent punitive action by the IRS.
Also note that if you are a BenefitMall customer, we offer ACA compliance services alongside payroll processing and benefits administration. We cannot help you turn back the clock on previous tax years, but we can help you maintain compliance in 2018 and beyond.
What the Law Requires
ACA requirements mandate that all applicable large employers (ALEs) offer minimum essential coverage to no less than 95% of its full-time workforce. A failure to do so results in an annual penalty of at least $2,000. That penalty jumped to $2,260 in 2017.
The IRS sends out 226J letters to all ALEs it believes were not compliant for at least one month in the previous tax year. If your company received such a letter, it is likely you were not fully ACA compliant. However, it is possible that the letter was sent by mistake. Even as companies are struggling to comply with ACA mandates, the IRS has had quite a bit of trouble on its end as well.
Don't panic upon receipt of letter 226J. Instead, read it through and make sure you understand it completely. Then follow the instructions contained in the letter. You will know soon enough where you stand with the IRS.
You Have the Right to Respond
ACA regulations require the IRS to give employers an opportunity to respond to letter 226J before assessing penalties and demanding payment. The letter itself should provide clear instructions about your options. Should you decide to dispute the IRS' findings, the letter will explain what to do next.
An employer formally disputing the IRS assessment should receive a follow-up letter 227 acknowledging the dispute and offering the employer further instructions. The employer will then have the opportunity to request a meeting with the IRS Office of Appeals, a meeting that usually takes place within 30 days of the issuance of letter 227.
The requested meeting should determine whether the employer was truly out of compliance or not. In cases warranting penalties, said penalties will be assessed and the IRS will demand payment. It is then up to the employer to make that payment to avoid additional penalties. Should the employer prevail, the IRS will dismiss the matter.
Trust Your Payroll to BenefitMall
Receiving IRS letter 226J is a serious matter whether your company has not complied with the provisions of the ACA or not. It should be dealt with as such. If your company has received the letter and simply chooses to ignore it, the IRS will assume you agree with their assessment. They will then assess the appropriate penalties and demand immediate payment.
As previously mentioned, BenefitMall cannot help you with ACA compliance from past years. What your company did in previous tax years is water under the bridge. Having said that, we can help you maintain ACA compliance moving forward. We invite you to let us help you with payroll, benefits administration, and ACA compliance. You'll be glad you did.