10/30/2024

What Actions to Take if the IRS Notifies You of Affordable Care Act Penalty Fees

Employers have reported receiving two types of penalty notices

HR Question: How do I know if my company needs to submit Affordable Care Act (ACA) reporting to the Internal Revenue Service (IRS)? What are the potential ACA penalty fees if we do it wrong?

HR Answer: Any employer with self-insured medical benefits or with 50 total Full-Time and Full-Time Equivalent employees is required to report to the IRS. (Not sure if you have 50 Full-Time Equivalent employees? Here’s a guide to do the math.) Failure to report to the IRS could result in two different types of penalty notices, Section 4980H(a) and Section 4980H(b) penalties.

Employers have reported receiving two types of penalty notices

The first type of penalty notice assesses penalty fees for employers who filed in an audited year, but based on the information provided, the IRS does not believe that the employer offered the minimum essential coverage with minimum value to all full-time employees. This could mean that the smallest benefit plan offered to employees was too expensive when compared to their pay. If employers fail to meet this threshold of minimum essential coverage, they could be assessed penalty fees.

Please select this link to read the complete article from OSAP member Clark Schaefer Strategic HR.