The Internal Revenue Service (IRS) has started the process of levying penalties on employers under the Affordable Care Act (ACA) employer shared responsibility provision. Often called the employer mandate or play or pay, the ACA provides for the IRS to assess penalties on employers that do not offer adequate health coverage to their full-time employees. Although the mandate took effect in 2015, the IRS is just now starting to send penalty notices. This article explains the IRS process and the steps you can take if you receive a penalty notice.
Looking Back to 2015
The first round of penalty notices pertains to calendar year 2015. Employers that receive a notice will only have 30 days to respond, so it is advisable for all employers to prepare in advance by reviewing what their situation was in 2015.
Applicable Large Employer (ALE):
For 2015, the play or pay rules applied only to employers that had an average of 50 or more full-time employees, including full-time equivalents, in 2014. Related employers in a controlled group, such as parent-subsidiary groups and entities under common ownership, were counted together to determine whether they were ALEs. Non-ALEs were exempt from the mandate.
Penalties were triggered only if a full-time employee received a government subsidy to buy individual health insurance through a Marketplace. In that case, penalties for 2015 were based on a two-prong test: