Employers may be receiving an unwanted letter in the mail, if they haven’t already. The final stage of the 2015 Affordable Care Act tracking and reporting process has hit employers in the form of penalty letters from the IRS.
From the inception of the ACA, there’s been a wave of confusion in reporting with employers not necessarily understanding what they needed to do, or not taking it as seriously as they should have, said Arthur Tacchino, principal and the chief innovation officer at SyncStream Solutions, a reporting and compliance company based in New Orleans, Louisiana. What’s added to that confusion is that it took so long for the penalties to be implemented, he added.
“There’s already the political environment causing confusion,” he said. “Plus, employers are thinking, ‘I did the reporting and I didn’t hear anything about it. I guess I have nothing to worry about.’ And now the IRS is sending these waves of letters and employers are taken off guard.”
It got real for many employers when they received those letters, he said. Now they’re in the position where they must go back three years to figure out exactly what they did.
There are two types of penalties an employer may receive, Tacchino said. In one case, an employer supposedly did not offer coverage to full-time employees, and that penalty is roughly $2,000 per full-time employee. In the other case, the IRS contends that, although the employer did offer coverage, it was not affordable for a select number of employees, and the penalty is $3,000 per employee. The letter explains which penalty an employer is receiving and the IRS calculated that penalty.
Employers have the right to refute the penalty, Tacchino said. The idea here is that an employer can argue that they did not do everything correctly that first reporting season, but here’s why a penalty should not be enforced. It could be that the employer made a mistake or provided inaccurate information in the 2015 reporting or that the IRS made a mistake in somewhere by miscalculating the amount owed.
Tacchino suggests that employers be proactive rather than reactive if they believe there are any concerns in their 2015 reporting.
“You don’t want to wait to get the letter to figure out what the process is. You want to be prepared in at least understand the basics of what the timeline is and the forms involved,” Tacchino said, adding that employers should make sure to put a process in place so that in the future they can have the necessary information is at their fingertips rather than have to scramble for it.
Misty Guinn, director of benefits and wellness at Benefitfocus, suggested a process for employers who receive letters:
- Respond within 30 days or request an extension (the IRS usually will grant one).
- Review 2015 forms (1094-C and 1095-Cs) to ensure the information is correct and properly reflected in the IRS letter.
- Challenge the assessment if necessary. File an ESRP Response form (Form 14764) including a signed statement explaining the reason(s) for the disagreement and any supporting documentation. This could include something like a calculation of the adjusted employer mandate assessment or the correction of any errors on 1094/1095s.
- Review 2016 and 2017 filings to make sure any errors from 2015 filings were not repeated.
Every employer should understand the timeline if they were to receive a letter, Tacchino said. Once they receive it, they have a month to respond. For a proactive employer who has already gathered information from the 2015 reporting season before they received the letter, this deadline won’t be as daunting.
Tacchino also advised that employers re-evaluate their ACA compliance plan is and determine if they have been tracking and reporting correctly.
“The reality is the IRS has made it clear that, although there are legislative efforts to alter penalties and although there’s always political talk about the ACA, [they’re] still moving forward,” he said, adding that, per the law, they intend to collect the penalty money.
The 2015 reporting season is not the only one that should be on employers’ minds. There’s also a new compliance rule employers need to take note of.
Despite the confusion of the future of the ACA, it is still alive and well, and employers have the same issues they did a year ago — with one exception, according to Annette Bechtold, senior vice president of regulatory affairs and reform initiatives at OneDigital, an insurance company based in Atlanta.
An area of note is expanded requirements under mental health parity, she said. Under the Mental Health Parity and Addiction Equity Act, employers with 50 or more employees must offer the same level of coverage for mental health treatment as it does for all other medical treatment in quantifiable areas of the plan such as deductibles, coinsurance and copay amounts. The definition of parity has expanded.
“The Department of Labor now challenges health plans to make sure there is parity in the non-quantifiable areas of the plan, including adequacy of the physician network,” said Bechtold.
This isn’t simple for employers in certain areas of the country which have difficulty with the lack of desire of mental health professionals to join networks, she said.
“This may become a significant compliance hurdle for employer health plans as employers try to figure out how to create equality within their health plan,” Bechtold said.