ACA Employer mandate penalties increased for 2018

Tony Wilson
NUVISION Financial Corp.

While the Affordable Care Act’s Individual Mandate is repealed beginning in 2019, the Employer Mandate still is the law, and the IRS recently updated those penalties for 2018.

The penalties relate to applicable large employers, or ALEs, that fail to offer affordable coverage to all their full-time employees.

The update, along with additional information for ALEs, was posted on the IRS website in the section, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act“:

  1. The 2018 adjusted penalty amounts for each full-time employee failure are:
    • $2,320 as compared to $2,260 in 2017 (Penalty A)
    • $3,480 as compared to $3,390 in 2017 (Penalty B)
  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. The affordability threshold for 2018 is 9.56 percent.
  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.

As a reminder, the IRS has started to send Letter 226-J to inform ALEs of their potential liability under the Employer Shared Responsibility Payment for the 2015 calendar year. This is the first-ever assessment of employer shared responsibility penalties.

IRS Letters 226-J 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 a Letter 226-J and you work with Tony Wilson at NUVISION Financial Corp., you can contact him directly. If not, please contact us if you have any questions.

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