IRS Releases New Employer Mandate Enforcement Web Page

IRS Releases New Employer Mandate Enforcement Web Page

  • On June 4, 2018
  • ALE, Employer Reporting

Last week, the Internal Revenue Service (IRS) unveiled a new webpage focused on helping applicable large employers (ALEs) understand the Letter 227 series, which some employers may receive in connection with IRS’s employer mandate enforcement efforts.  Given that the IRS is now actively assessing penalties on ALEs that may not have met the terms of the Patient Protection and Affordable Care Act’s (ACA) employer shared responsibility provisions (employer mandate) in 2015, it is vital for businesses and health brokers alike to understand IRS communications on the matter and to be prepared to respond.

If the IRS believes an ALE owes an employer mandate penalty, then they will notify the business by sending Letter 226-J, a penalty assessment notice.  The IRS already has a webpage dedicated to helping employers understand and respond to Letter 226-J.  The new web page covers the potential responses an employer may receive from the IRS once they reply to their penalty notice using Forms 14764 and 14765.   There are five possible responses an employer might get, and all versions explain the next steps in the penalty assessment, appeals and resolution processes.

An employer would receive Letter 227-J in response if the company agreed with the employer mandate penalty assessment initially proposed by the IRS and had made arrangements to pay the penalty.  Letter 227-K will arrive if the IRS has accepted the employer’s objection to the penalty assessment initially proposed and has reduced the penalty amount owed to $0.  Neither one of these two letters requires a response from the ALE, but the employer should retain copies of either letter for their records.

If ALE receives Letter 227-L, it will indicate that the IRS has reviewed their response to Letter 226-J and reduced their proposed penalty assessment to a different amount.  The employer then has the opportunity to either agree with the new penalty amount and make a payment arrangement or contest it by requesting a meeting with the IRS or appealing the determination.  Letter 227-M is similar, but it will indicate that the IRS has reviewed the company’s initial Form 14764 and 14765 submissions and has decided to keep their proposed penalty assessment at the same level.  An employer can either elect to pay the settlement, request a meeting with the IRS, or appeal.

Finally, if an employer has exhausted the IRS appeals process for penalty assessments, they will get a Letter 227-N.  This letter will give the final decision of the IRS appeals office and explain the employer’s resulting penalty amount.  This letter does not require a response other than payment of the penalty assessment according to the instructions outlined in the letter.

Compliance with the employer mandate is daunting for many employers, with lots of confusing rules and nuances, and mistakes can be very costly.  As a way of showing value to your larger employer clients, consider alerting them to the new IRS webpage and then using it as a segue to offering to review employer mandate procedures.  You can discuss how pay-or-play obligations might impact their coverage offerings and contribution strategies for the year ahead.  You could also cover how they should be on the lookout for IRS communications about the mandate, even if they believe that they have offered coverage appropriately.  It’s a good idea to also check in with smaller employer clients that may have a lot of part-time employees or are part of a larger ownership group too, because these clients may be applicable large employers and not realize it.

Finally, June is an excellent time to review the related employer reporting process with your clients.  What was their experience with their reporting vendor from the past year?  Do they need to make any changes to their service or internal processes?  Get the ball rolling now so that your clients aren’t scrambling in the 4th quarter!

By Jessica Waltman, Special Contributor

Jessica Waltman is a health reform strategist, with more than 20 years of experience in health insurance markets and health policy. She is the former Senior Vice President, Government Affairs, for the National Association of Health Underwriters.