ACA reporting enforcement picks up steam

The employer shared responsibility (“pay or play”) mandate still requires applicable large employers (ALEs) to offer health insurance to full-time employees. The IRS is actively proposing employer shared responsibility payments (ESRPs) whenever it suspects that an ALE may not have complied with this coverage mandate. ALEs that do not offer qualified health coverage to substantially all full-time (FT) or full-time equivalent (FTE) employees may be liable for ESRP penalties. A timely, well-documented response is the best way to reduce or argue away a proposed ESRP.

Background

An ALE is an employer with at least 50 FT or FTE employees. An ESRP is owed when:

1. an ALE fails to offer minimum essential coverage to substantially all (95% or more) of its FT and FTE employees (as well as dependents) and at least one FT or FTE employee is offered a premium tax credit; or
2. an ALE offers minimum essential coverage to substantially all FT and FTE employees (as well as dependents) but at least one FT or FTE employee was allowed a premium tax credit because the coverage offered was not affordable by Affordable Care Act (ACA) calculus, did not provide minimum value or the individual was not offered coverage.

FT or FTE employees are those who work at least 30 hours per week or 130 hours in a month. ACA coverage is deemed affordable for 2022 if the employer’s lowest cost, self-only plan costs less than 9.61% of the employee’s annual household income (based on the federal poverty level) and is estimated to drop to 9.12% for 2023 coverage. The ESRP penalties for 2022 range between $2,750 and $4,120 per FT or FTE employee depending on the ACA provisions in violation. The penalty range for 2023 is projected to be between $2,880 and $4,320.

Reporting

All of this coverage information must be provided to employees and to the IRS. The draft 2022 forms and instructions currently have few, if any, changes from prior years. 2022 reporting is to be issued to employees by March 2, 2023 (for Form 1095-C). The IRS requires these forms to be submitted to it on or before March 31, 2023, if electronically filed (required for 250 or more forms) or Feb. 28, 2023, if paper forms are filed. Requisite filings include:

• Form 1094-B – Transmittal of Health Coverage Information Returns. Includes the filer’s name, address, employer identification number, contact information and the total number of Forms 1095-B being transmitted to the IRS.