ACA Compliance Podcast: Penalties and Next Steps

Alicia Half from ETC Companies gives us the run down on the current ACA Compliance environment and advice on next steps an employer can take if they are facing a penalty.

The proof is in the pudding, or in the world of ACA, the reporting. The Affordable Care Act brought big changes, not only to healthcare and medical plans, but also to how employers are expected to handle medical coverage offerings. Just like in geometry class, you have to show your work, and if an employer doesn’t present their data like a proud middle-schooler at the science fair, there could be dollars at stake.

Alicia Haff, partner at Eligibility Tracking Calculators, guides us through the murky waters that are the ACA reporting rules directly pertaining to TRS medical, coverage adopted by most education employer groups in the state of Texas. Alicia is especially capable of this task, as a lawyer formally handling litigation for employers that has “turned [her] eyes” to assisting employers with ACA compliance. This has been her focus since 2013. Alicia and ETC have partnered with FBS to provide expertise and reporting services to clients for several years.

Listen as Alicia lays down the laws that employers must follow to avoid reluctantly pulling out their checkbooks for the IRS.

Here are some highlights from the podcast:

When asked about the current compliance environment, (2:18) Alicia says “The IRS is busy collecting penalties and there are several different ways in which the IRS is currently collecting penalties.

One penalty-collecting device is the 226J letter. (2:30) “In that letter the IRS sends to the employer advising that employees have gone to the marketplace and obtained subsidies and the employer now owes money to pay for the subsidies.”

Another is the 5699 letter, which comes into play for (2:53) “Employers that should have filed their 1095s, according to the IRS, but did not do so.” This is followed by the letter 5005-A, “asking the employers where their forms are and asking them to please provide them to the IRS.” If the forms are not received within 30 days, the IRS (8:44) “will take the total number of W2s you issued for the year we’re looking at and we’re going to multiply that times somewhere between $520 and $540” as a proposed penalty.

Omitting a single page could see an employer facing enormous penalties. The 1094-C Transmittal Letter, saying an employer (4:25)“offered [medical] to everyone we should have, basically, we offered to substantially all of our eligible employees” must make its way to the IRS. If not, an employer could face (5:05) “50 million dollars, for example, in penalties because we did not tell the IRS, according to their systems, that we offered to everyone we should have.”

Sometimes, though it may be beneficial to omit certain forms and (10:40) “only prepare the forms (1095) for the folks that they absolutely have to report”, as Alicia says “do not over-report to the IRS, that will trigger penalties, most likely.”

What employees don’t require a 1095 filing? (11:13) “Any employees who do not work full-time hours in accordance with the IRS’ rules.” A full-time employee for the IRS mandates that “a human must be working 130 hours or more for three months straight and be employed in the fourth month.”

Alicia suggests employers minimize risk of facing penalties and (15:15) “really keep an eye out and pay attention to full-time employee’s schedules because oftentimes those not eligible for district contribution, if you will, or not eligible for payment from the employer for their plans will end up working extra hours because the full-time employees want to take a break.”

If you get a penalty letter, what should you do? (19:02) “First and foremost, do not pull out your checkbook. The IRS, in both the commercial environment and districts in invariably wrong on their calculations of penalty assessments. So, when the letter comes in, the first thing we recommend is find council to assist in answering those letters.”

We could quote her all day, but we recommend listing to Alicia’s expertise fully in the podcast.