ACA Employer Mandate Enforcement

Preparing for ACA Employer Mandate Enforcement

June 15, 2022 - HUB
By: HUB’s EB Compliance Team

Enforcement of the Affordable Care Act’s (“ACA”) employer mandate has increased recently. If you aren’t familiar with the mandate, see our previous articles. Employers receiving an IRS Letter 226J should be prepared to respond.

Before the Letter Comes

If an employer hasn’t received an IRS Letter 226J yet, they should nevertheless prepare. As we have advised previously, the IRS does not believe there is a statute of limitations on ACA employer mandate penalties. This means the IRS could audit any year, no matter how old. As a result, even if an employer has not received a letter 226J yet, they should prepare every year like they are going to. Steps to take today include:

Notify HR and finance employees (along with anyone who receives/opens mail) of the possibility of these letters so they know to look for them. This will help ensure the Letter 226J does not get passed around for days while coworkers try to figure out where it should go.
Check the contact person listed on IRS Forms 1094-C for all prior years and be sure mail addressed to that person gets forwarded if they are no longer with the company. This will help ensure that the Letter 226J will get forwarded to the correct person.
Retain copies of:
- Forms 1094-C and 1095-C. If you are contemplating changing vendors, be sure you obtain copies of the forms from them before you issue a termination/cancellation notice to the vendor.
- Insurance policies or other plan documentation
- Offers of coverage (which may include screenshots of online enrollment options or paper forms)
- Documentation of waived coverage
- Affordability determinations for coverage offered
As a preventive mechanism, review prior years’ forms to ensure all appropriate boxes are checked and the right codes are reflected in Line 16 of the Forms 1095-C (if applicable). Review HUB’s Decoding the Codes resource to help you navigate through the forms. Consider refiling forms for prior years if mistakes are identified. Hub strongly recommends consulting experienced employee benefits counsel in making this decision.

Responding to a Letter 226J

If an employer does receive a Letter 226J, then it is important to be timely in responding to it. Ignoring the IRS is not advised.

The Letter 226J generally requires a response within 30 days of the date of the letter (we understand extensions can be requested). If you receive a Letter 226J and you don’t respond timely, the IRS can just assess the penalty. If the IRS does not receive a response to the assessment, they will likely send you a notice of a levy against your business’s assets. Once you’ve responded, be on the lookout for the appropriate version of IRS Letter 227.

In responding, remember to:

Complete and sign Form 14764 entitled “ESRP Response”;
Update Form 14765 (if applicable) entitled “Employee Premium Tax Credit (PTC) Listing”; and
Write an appeal letter to the IRS.

Employers should be sure to complete all three parts in responding (to the extent necessary). Additionally, we recommend following our top 10 tips for replying to a Letter 226J.

If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.

NOTICE OF DISCLAIMER

Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.