[IMGCAP(1)]This year, for the first time ever, employers will begin receiving notices from the Federally Facilitated Marketplace indicating that one of their employees signed up for health coverage through the Marketplace and received advanced premium subsidies for that coverage.
Given the exposure for tax liability under the ACA to the employer and employee, many employers are going to be asking their advisers what the notices mean and what actions they need to take if they receive one, according to Nicole Elliott, former IRS senior director of operations for the Affordable Care Act and Washington, D.C.-based partner with Holland & Knight.
“The ACA generally requires that applicable large employees offer health coverage that is affordable and of minimum value to their full-time employees and their dependents or face a tax, often referred to as the employer “pay or ‘play” provision or the employer mandate,” explained Elliott.
Tax liability under this employer provision is triggered if one of the employer’s full-time employees receives a premium tax credit. The amount of the tax is determined by the number of full-time employees who received the premium tax credit.
“In such a case, advance credits can begin and the Marketplace is required to send the employer a Marketplace notice,” said Elliott. “This is the first year FFM is sending out the notices. It’s worth noting that there is no commitment to send a notice to all employers, and it can send a notice only if the individual provides a complete employer address. As a result, some employers expecting a notice may not receive it.”
The notices will give employers advance warning that they may have potential tax liability under the employer mandate, but the Marketplace cannot distinguish whether the employer is large enough to be subject to the mandate, Elliott noted. And even if the employer is an applicable large employer, the individual identified in the notice may not be a full-time employee. These are some of the reasons the IRS may not necessarily be in “hot pursuit” of the employer, she indicated.
“Employers who receive a Marketplace notice may want to appeal the decision that the individual was not offered employer coverage that was affordable and of minimum value,” Elliott advised. “An employer has 90 days from the date of the notice to file an appeal, which is made directly to the Marketplace. Importantly, the IRS will independently determine whether an employer has a tax liability, and the employer will have the opportunity to dispute any proposed liability with the IRS. Likewise, an individual will be able to challenge the IRS denial of the credit. Any contact with the IRS will be late in the game,” she noted. “It will be after the year’s tax liabilities have already been incurred. Therefore, it may be advisable to appeal, even though an appeal is not required.”
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