Employers, Are You Ready for IRS Letter 226J?

Since early 2013, when we got the final rules for employers offering health insurance coverage under the Affordable Care Act, I have spoken to and met personally with literally thousands of employers to help them understand their compliance burdens under the ACA as business owners. Many of them were, and still are, Blue Cross customers. I want to take this opportunity to thank you for your loyalty to us. And because you’ve stuck with us, I want to tell you Straight about an ACA issue coming up now that could affect you.

The ACA Employer Mandate
Remember what we talked about in 2013, 2014 and even 2015 to help you comply with the Employer Mandate under the ACA? Remember your ALE-Counts versus your MLR-Counts  Remember if you are an Applicable Large Employer (ALE), those threshold counts dictate how much in fines you could be at risk of owing if you miss the boat on compliance?

It’s been more than three years for some of you, with nary a peep from the Internal Revenue Service. I know lots of folks who own and run businesses look at the amount of effort and expense involved in tracking compliance with these issues and wonder, since no one has been fined or notified even after three years, if it’s all worth the effort?

Turns out, it was. And will continue to be.

Fine Notices to Non-Compliant Employers
The IRS just issued a new set of Frequently Asked Questions (FAQs) that lays out pretty clearly that Fine Notices, known as Letter 226Js, are on the way to hundreds of thousands of businesses around the nation.

Here’s the updated actual Question 58 under the Employer Responsibility Requirement that talks about this:

58. When does the IRS plan to begin notifying employers of potential employer shared responsibility payments?
For the 2015 calendar year, the IRS plans to issue Letter 226J informing ALEs of their potential liability for an employer shared responsibility payment, if any, in late 2017.

For purposes of Letter 226J, the IRS determination of whether an employer may be liable for an employer shared responsibility payment and the amount of the potential payment are based on information reported to the IRS on Forms 1094-C and 1095-C and information about full-time employees of the ALE that were allowed the premium tax credit.

So, let’s keep our wits about us. Hope you filed all those 1095s!

Notice the IRS is a couple of years behind, and this first batch of 226J letters will be for violations that happened in 2015. 2016’s letters are likely to not be far behind. And there will be an appeals process, but the FAQs indicate the timeframe for your appeal is very short. In fact, if you request a conference to discuss your case:

A conference should be requested in writing by the response date shown on Letter 227, which generally will be 30 days from the date of Letter 227. (Letter 227 is the IRS response to your initial answer to your 226J. You have 30 days from the creation of the 227 to request a conference for an appeal.)

What Should Employers Do?
Given that the IRS is starting to fine employers for non-compliance, there are three key things business owners should keep in mind:

1. Continue tracking your Applicable Large Employer (ALE) status. Make sure you can prove you are a non-ALE if that applies to your business.
2. Continue completing the 1095 B/C forms each year and submitting them to the IRS.
3. Contact your broker/agent/consultant/benefits attorney IMMEDIATELY upon receipt of an IRS Letter 226J. It could say you owe many thousands of dollars, so act quickly!

It’s crunch time now. All the money, time, restructuring and expense you invested into coming into compliance with the ACA’s Employer Mandate is about to bear fruit.

Or not, if you chose to ignore the rules or let your guard down!

If you receive a 226J letter, I would love to hear from you! Please let me know your story by posting a comment after this article or emailing me at Michael.Bertaut@bcbsla.com.