Department of Health and Human Services Sends ACA Notices to Employers

Employers may receive a notice from the U.S. Department of Health and Human Services (HHS) informing them that they may owe the employer shared responsibility payment because an employee applied for health coverage through the Marketplace and was found eligible for the advance premium tax credit (APTC) or cost-sharing reduction (CSR).

Under the Affordable Care Act (ACA), the Health Insurance Marketplace (or state insurance marketplaces) are required to notify all employers if one or more of their employees enroll in coverage through the Marketplace and receive (or were eligible to receive) advance payments of the premium tax credit (APTC) or cost-sharing reductions (CSRs).  This notification process is being phased in throughout 2016, and letters are now being sent to employers from the U.S. Department of Health and Human Services (see Example).

Under the ACA, an applicable large employer (ALE) is required to offer minimum essential coverage to their full-time employees and their dependents up to age 26, and that coverage must be affordable and provide minimum value to the employee, or potentially face penalties under Section 4980H.  One of the prerequisites to the Section 4980H penalties is that a full-time employee receives APTC or CSRs.

The notices being sent by HHS are NOT penalty assessments; only the IRS will assess penalties under the ACA.  Instead, they are simply notifications to the employer that one of their employees has received APTC or CSRs.  However, it is extremely important if you are an ALE to read the notice and make sure that you agree with the statements made by the employee when he or she enrolled in the coverage (i.e., that they (1) didn’t have an offer of health care coverage from employer; (2) did have an offer of health care coverage, but it wasn’t affordable or didn’t provide minimum value; or (3) were in a waiting period and unable to enroll in health care coverage).

There is currently no reliable verification process in place when individuals obtain coverage through the Marketplace; the Marketplace essentially relies on the employee’s attestation that they were not offered the required health coverage.  Therefore, if the employer believes that the employee in question should not have received APTC or CSRs because the employer offered affordable, minimum value insurance to the employee, then they need to appeal the notice within 90 days from the date stated on the notice.  Filing a successful appeal may eliminate reports from the Marketplace to the IRS that your employee received APTC or CSRs.  If, however, the employer is not an ALE or the employee in question was either not a full-time employee or was not offered the required insurance, there is no need to file an appeal with the Marketplace.

Please contact me or your HBK service professional with any questions or concerns.  HHS also has FAQs about this notice program.

About the Author(s)
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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