How does the IRS determine that Applicable Large Employers are complying with the ACA employer mandate?
422 views | Last modified 12/31/2020 3:18:09 AM EST | Added by ACAwise Team

Under the ACA employer mandate, every ALE (50 or more full-time equivalent (FTE) employees during the preceding calendar year) must offer minimum essential coverage that is “affordable” and provides “minimum value” to 95% of all full-time equivalent employees and their dependents. 

To gather employer-offered health coverage information, the IRS designed IRC Section 6056, which requires every Applicable Large Employer to report their offered health insurance coverage information to the IRS and furnish statements to their employees.

To report employee’s health insurance coverage for each month of the year to the IRS under section 6056, ALEs use Forms 1094-C and 1095-C with the following information:

  • The covered individual or employee's data (name, address, and SSN/TIN)
  • The plan provider's data (name, address, EIN, and contact info)
  • For self-insured group health plans, provide the plan sponsor’s information (name, address, EIN, and contact info)
  • The offer of coverage code for each recipient/employee, broken down by month
  • The recipient/employee’s premium share of coverage, by month
  • Any safe harbor relief codes that are applicable
  • The covered individual's spouse and dependent(s) information, if applicable (name, SSN or DOB, and months covered)

Using the above information, the IRS determines whether or not the Applicable Large Employers are compliant with the ACA employer mandate.

What Happens if not comply with the ACA employer mandate?

If the IRS determines the Applicable Large Employer does not comply with the ACA employer mandate, the IRS will send Letter 226J to these employers and plan sponsors relating to compliance with the Employer Mandate for a given plan year.

Any employer or plan sponsor who receives a 226J letter must take immediate action to develop a response to the IRS within the required 30 days of the letter date. This may help the employer reduce or eliminate the ESRP assessed. 

If you have already received a penalty notice from the IRS and unsure how to respond to it, don’t worry, you can get in touch with our ACAwise experienced professionals who can help you to:

  • Evaluate the penalty notices
  • Respond to IRS with acceptable reasons for late filing
  • Avoid paying unwanted penalties.

To learn more about ACA penalties, check out here

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