Insights

IRS Updates Employer Mandate Penalties for 2018


The IRS recently updated the website section, "Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act," primarily to adjust for 2018 penalty amounts that relate to ALEs that fail to offer affordable coverage to all their full-time employees (under IRC Section 4980H). The updates include (Q&A-54):

  1. The 2018 adjusted penalty amounts for each full-time employee for IRC Section 4980H failures are:
    • $2,320 under Code Section 4980H(a) (Penalty A) (as compared to $2,260 in 2017)
    • $3,480 under Code Section 4980H(b) (Penalty B) (as compared to $3,390 in 2017)
  2. The 2018 indexing adjustment for the required contribution percentage used to determine whether employer-sponsored health coverage is "affordable" for purposes of employer shared responsibility.
    • Affordability threshold for 2018 is 9.56 percent (Q&A-39)
  3. Clarification that the transition relief has now expired and is not available for 2017 and future years. The transition relief that delayed the effective date of the employer shared responsibility provisions to certain employers that was available for the 2015 plan year (including months falling in 2016 for non-calendar plans) has now expired (Q&A-2).

As a reminder, the IRS has started to send Letter 226-J to inform ALEs of their potential liability under IRC Section 4980H (Employer Shared Responsibility Payment – ESRP) for the 2015 calendar year. This notes the first-ever assessment of employer shared responsibility penalties.

IRS Letters 226J are based on information from Forms 1094-C and 1095-C filed by the ALE, the individual income tax returns filed by the ALE’s employees and information from the state health insurance exchanges relating to premium tax credit qualification. Some of the notices already distributed have contained assessed penalties in the millions of dollars. More Letters 226-J are expected to be issued in 2018 and future years. If you receive one, be sure to reach out to counsel so that you can promptly prepare a response within 30 days.

IRS Website »