Audit Reveals Pay or Play Enforcement Issues

On April 7, 2017, the Treasury Inspector General for Tax Administration (TIGTA) released the results of its audit to assess the Internal Revenue Service’s (IRS) preparations for ensuring compliance with the employer shared responsibility rules and related reporting requirements under the Affordable Care Act (ACA).

The TIGTA audit revealed a number of major system and operational problems that have hindered or delayed the IRS’ enforcement of these provisions. As a result, the IRS has been unable to identify the employers potentially subject to an employer shared responsibility penalty or to assess any penalties.

Although no penalties have been assessed under the employer shared responsibility rules at this time, employers subject to these rules are still responsible for compliance.

The TIGTA report emphasized that the IRS’ systems to enforce these provisions have not been canceled, and could be up and running as early as May 2017.

Future Enforcement

At this time, the IRS has been unable to identify the employers potentially subject to an employer shared responsibility penalty or to assess any penalties. To enforce these rules going forward, the IRS plans to mail a letter to ALEs informing them of their potential liability for a penalty. These letters will:

  • Include the names of the employees who received a subsidy for the applicable tax year; and
  • Provide ALEs with an opportunity to respond before any penalty liability is assessed or notice and demand for payment is made.

These letters are separate from the Section 1411 Certification sent by the Department of Health and Human Services (HHS) that employers began receiving in 2016. The Section 1411 Certifications are sent to all employers with employees who receive a subsidy to purchase coverage through an Exchange (including both ALEs and non-ALEs). Section 1411 Certifications do not trigger or assess any penalties for any employers.

The IRS previously indicated that it expected to begin sending letters in early 2017 informing ALEs that filed Forms 1094-C and 1095-C of their potential liability for an employer shared responsibility penalty for the 2015 calendar year (with reporting in 2016).. However, at this time, no letters have been sent to any ALEs

For future years, the IRS expects to begin issuing these letters in the latter part of each calendar year in which reporting was due (for example, in late 2018 for reporting in 2018 for coverage in 2017).

Read More»

DISCLOSURE

The information provided herein is intended solely for the use of our clients. You may not display, reproduce, copy, modify, license, sell or disseminate in any manner any information included herein, without the express permission of the Publisher or Publishers of articles within.

The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.