Although the GOP tax reform bill zeroes out the penalty for failing to comply with the Affordable Care Act’s individual coverage mandate, it does nothing to alleviate the employer ACA mandate. Coincidentally, the IRS has just started issuing notices of potential penalty assessments under that employer mandate (commonly known as the “play-or-pay” provision).
These notices take the form of a “Letter 226J” (this notation appears in the footer of each page), and the Letter makes crystal clear the amount of the potential penalty assessment (which can be substantial). This dollar amount appears in bold on the second line of the Letter’s text.
The version of Letter 226J that is currently being issued relates to calendar-year 2015. For that year, only employers having more than 100 full-time employees (including full-time equivalents) were subject to the play-or-pay provision. Starting with 2016, however, this employee threshold drops to only 50 – thereby sweeping in several more mid-sized employers.
Although Letter 226J generally provides a 30-day response period, those days can easily be consumed in (i) getting the Letter to the proper office or individual, (ii) gathering the data needed to respond (often from a vendor hired to perform the ACA reporting), and then (iii) completing the IRS response form (and related documents). Any employer receiving a Letter 226J will therefore want to take prompt action to respond. Members of Spencer Fane’s Employee Benefits Practice Team can assist with that effort.
This blog post was drafted by Ken Mason, an attorney in the Spencer Fane LLP Overland Park, KS office. For more information, visit spencerfane.com.