Many Applicable Large Employers (ALE’s) have already started received Letter 226J from the IRS that indicates their proposed assessment of a penalty under the Employer Shared Responsibility provision of the Patient Protection and Affordable Care Act (ACA).
Letter 226J outlines several things for the ALE receiving it. The letter will tell the ALE what the proposed penalty assessment could be and will also state whether the assessment is based on an “A” or “B” Penalty. An “A” Penalty is assessed when at least one full-time employee is provided a premium tax credit when the employee obtains coverage in the healthcare marketplace exchange. An ALE may be subject to a “B” Penalty if employees decline substandard coverage (aka coverage offered is not affordable) offered by the ALE and then receive a tax credit when obtaining coverage from the marketplace exchange. The letter also provides a list to the ALE of the full-time employees that received a premium tax credit and therefore created the potential for a penalty under the ACA.
It is very important for ALE’s to respond to Letter 226J and do so in a timely manner. The IRS provides 30 days, from the date of issuance, for ALE’s to respond, and if no response is made by the ALE, the IRS will conclude the employer does not disagree with the proposed assessment. ALE’s should not assume that because they received a letter that they will owe a penalty or that the amount outlined in the letter is the amount they will ultimately pay to the IRS for non-compliance with the ACA. Additionally, if no response is made to the IRS, the IRS will demand payment by issuing notice CP 220J. Only once the notice and demand for payment is received is the ALE required to make the penalty payment. Letter 226J is not requesting any payment but is giving ALE’s the chance to respond/disagree with the decision initially made by the IRS & Marketplace.
Letter 226J clearly outlines instructions on how to respond to the letter if the ALE feels that it is not liable for the proposed penalty. ALE’s will complete Form 14764 responding to the IRS that it does not agree with the penalty determination. The ALE will provide the IRS with a signed statement explaining why it does not agree with the determination. Any supporting documentation should be provided to the IRS (for example, records indicating dates of termination of employees, proof that the ALE offered coverage to full-time employees) and any other information requested in Letter 226J. The ALE should also make any changes to the Employee Premium Tax Credit (PTC) Listing that was enclosed with Letter 226J. The Employee PTC Listing (Form 14765) will be included with Letter 226J and Form 14764 (ESRP Response). The Employee PTC Listing identifies each employee who received a PTC by month and also the line 14 and line 16 indicator codes that were provided on the employee’s 1095-C form. If the ALE provided the incorrect indicator codes on form 1095-C, the Employee PTC Listing provides a line for the ALE to correct the codes used.
Once the IRS receives the response to Letter 226J, it will acknowledge that it has received the response by sending the ALE a version of Letter 227. There are 5 versions of Letter 227, and the ALE will receive the appropriate version, acknowledging receipt of their response and an outline of any further action that may be required.
As tax season begins, the IRS is urging employers to educate their HR and payroll staff about a Form W-2 phishing scam that victimized hundreds of organizations and thousands of employees last year.
“The Form W-2 scam has emerged as one of the most dangerous phishing e-mails in the tax community,” the IRS said in a January 2018 alert. During the last two tax seasons, “cybercriminals tricked payroll personnel or people with access to payroll information into disclosing sensitive information for entire workforces,” the alert noted.
Reports about this scam jumped to approximately 900 in 2017, compared to slightly over 100 in 2016, the IRS said. As a result, hundreds of thousands of employees had their identities compromised.
The IRS described the scam as follows:
The IRS gave these examples of what appear to be e-mails from top executives at the organization:
The scam affected all types of employers last year, from small and large businesses to public schools and universities, hospitals, tribal governments and charities, the IRS said.
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On Dec. 22, 2017, President Trump signed into law Congress’s tax reform legislation. The summary below addresses some of the changes that relate to compensation and employee benefits.
Individual shared responsibility – With respect to health care and employee benefits, the most important feature of the tax act is the elimination of the penalty on individual taxpayers who do not maintain minimum essential coverage. However, please note that this elimination of the penalty is prospective and only applies for months beginning after Dec. 31, 2018. Thus, the penalty remains fully in effect for 2018.
With the reduction in the penalty, some employers may see fewer employees enroll in health care coverage during their 2019 healthcare benefit open enrollment period. However, most employees will continue to view employers that offer health insurance coverage more favorably than those who do not. Therefore, offering health insurance will remain a valuable and tax-efficient recruiting and retention tool.
This may also reduce the number of individuals who enroll in healthcare through either the federal or various state specific healthcare marketplaces. However, premium tax credits will still be available for those individuals that purchase health insurance through these marketplaces. If enough healthy individuals drop their coverage, both the individual and employer group health market will likely see some cost increases to pay for the adverse selection impact of this change.
It is also important to remember that this change applies to the individual penalties only. The potential employer penalties for failing to offer coverage or offering inadequate coverage will remain, as well as the current law’s information reporting requirement.
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All OSHA 300A logs must be posted by February 1st in a visible location for employees to read. The logs need to remain posted through April 30th.
Please note the 300 logs must be completed for your records only as well. Be sure to not post the 300 log as it contains employee details. The 300A log is a summary of all workplace injuries and does not contain employee specific details. The 300A log is the only log that should be posted for employee viewing.
Please contact our office if you need a copy of either the OSHA 300 or 300A logs.
It is 7pm at night and you burn your hand while cooking dinner. Your doctor’s office is closed but you are pretty certain that your burn needs to receive some sort of medical attention soon. Should you go to the Emergency Room that is close to your house and most convenient or should you try to go to a Convenience Care Clinic at your neighborhood grocery store or go to the Urgent Care Clinic about 15 minutes away? Maybe you can just wait until the morning and try to get an appointment to be seen by your doctor.
It is generally known that a visit to the Emergency Room costs more than a trip to a Physician’s office for the same ailment/treatment, but most employees and employers do not realize just how different the costs between the various care options really are. Choosing the most appropriate option can save employees from paying higher copays and deductibles and it helps to keep the employer’s annual claims costs down as well. Since lower claims can positively influence the renewal rates for the next policy period, it is vital that everyone understand the available options for care so they can make an educated decision about what is best for their particulate sickness/injury.
Below is an example of what an average visit at various care options could cost for someone without health insurance:
Some Emergency Room trips are certainly needed & warranted based on the severity of the issue, however in the US, every year a substantial number of visits that occur at the ER are for situations which are not life threatening and where alternative treatments could have been provided for a far lower cost.
For example, a medium size business could see their claims reduced by almost $25,000 just by encouraging employees to utilize Urgency Care over an Emergency Room when appropriate. Collectively employees could also save up to $5000 a year in copays or more for plans that have deductibles for ER visits (based on 20 trips a year).
Emergency Room
These are facilities operated out of a hospital and other primary care centers that are typically open 24 hours a day. They are capable of handling severe and life threatening injury or illness. While the ER can handle virtually any problem, trips in general should be reserves for issues such as heavy bleeding, difficulty breathing, major burns, severe head injuries, internal injuries, convulsions/ seizures, severe chest or abdominal pain, pregnancy complications, sudden changes in vision or severe eye injuries, large open wounds, loss of conciseness, poisoning, spinal injuries, severe infections, severe allergic reactions, high fever or major broken bones.
Any case where an individual’s life could be reasonably at risk or the severity of the situation is not known, it is always best to err on the side of caution and visit the ER over other care options.
Emergency Rooms under a medical plan are usually subject to either copays ranging from $250 – $450 per visit or to the plan Deductible plus 20%-50% Coinsurance.
Urgent Care Centers
A level below an ER is an Urgent Care Center. These will typically have a medical doctor on site at all times during operational hours and commonly utilize Nurse Practitioners (NPs) or Physician Assistants (PAs) to assist patients. These facilities usually have extended hours, are open 7 days a week, and do not require appointments.
Instances where an Urgent Care trip would be appropriate include: Sprains & strains, minor burns, urinary tract infections, minor allergic reactions, fevers and/or flu, back pain, seasonal allergies, minor infections, vomiting and/or diarrhea, minor cuts requiring stitches, moderate asthma/ breathing discomfort, and minor broken bones.
Urgent Care Centers under a medical plan are usually subject to either copays ranging from $75-$100 per visit or to the plan Deductible plus 20%-50% Coinsurance.
Primary Care Physician Office
This would be either an individual’s Primary Care Physician or a physician’s office that handles general care on an as needed basis. This could be an independent office, or part of a larger group network. A doctor is usually onsite, but it is also common for PA’s or NP’s to treat patients as well. Many offices are open regular business hours (9-5), 5 days a week. These offices can generally handle everything that can be done at an Urgent Care Center, but at a lower cost. Most offices do require an appointment, so they are best when the matter does not require immediate attention.
Reasons to visit a Physician’s office are the same as an Urgent Care with the addition of a basic annual check up and/or preventative care. Preventative care (such as an annual wellness checks/exams) are covered under most medical plans at 100%.
Physician Offices under a medical plan are usually subject to either copays ranging from $20-$70 per visit or to the plan Deductible plus a copay of $25-$50.
Convenience Care / Retail Clinics
These are typically found inside of stores like Walmart, Target, CVS & Walgreens, but are also becoming more common in grocery stores as well. They are usually staffed by a PA or NP without a doctor on site. These clinics have similar, or slightly reduced hours than the retails stores they are in, and may or may not be open 7 days a week. They do not require an appointment and are better for minor issues that need attention.
Common reasons to visit a Convenience Clinic include sore throat, earache, sinus infection, flu shot, common cold, upset stomach, bug bites, minor fever, minor rash, coughing, & congestion.
Convenience Clinics under a medical plan are usually subject to either copays ranging from $40-$60 per visit or to the plan Deductible plus a copay of $20-$40.
Telemedicine
This is becoming more common as a care option for employees covered under medical plans. Telemedicine, also commonly called Virtual Visits, is when you speak to a healthcare professional through a computer, phone, or tablet. This is an alternative to an in person trip when a diagnosis rather than a physical treatment is needed. Virtual visits may occur with a doctor, NP, or PA and are often available 24 hours, 7 days a week. Telemedicine can be used for many of the same ailments that Urgent & Convenience Care can handle. It is also good as an initial option for those in rural areas who don’t have quick access to other facility options.
Common reasons to use telemedicine include minor allergies, fever, pinkeye, sinus infection. Cough/cold, diarrhea, rash, sore throat, congestion, urinary tract infections, flu or stomach ache.
Telemedicine / Virtual Visits under a medical plan are usually subject to a lower copay than a regular Physician office visit ranging from $10-$20 per visit.
In Summary
It is important to educate employees on their options and stress that choosing the most appropriate option for care will not only save them money on copays and deductibles, but can also help to keep the group premiums from significant increases at the end of the policy period. It is suggested to compile a list of several Urgent and Convenience Care facilities in the area, along with their hours of operation and recommended services they can handle for employees to use as a general reference. Distributing information about the availability of telemedicine and how to access it will also help to encourage employees to use lower cost options for care for minor issues.
In IRS Notice 2018-06, the IRS announced a 30-day automatic extension for the furnishing of 2017 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), from January 31, 2018 to March 2, 2018. This extension was made in response to requests by employers, insurers, and other providers of health insurance coverage that additional time be provided to gather and analyze the information required to complete the Forms and is virtually identical to the extension the IRS provided for furnishing the 2016 Forms 1094-C and 1095-C. Notwithstanding the extension, the IRS encourages employers and other coverage providers to furnish the Forms as soon as possible.
Notice 2018-06 does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2017 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS. The filing due date for these forms as it stands today remains February 28, 2018 (April 2, 2018, if filing electronically).
The IRS also indicates that, while failure to furnish and file the Forms on a timely basis may subject employers and other coverage providers to penalties, such entities should still attempt to furnish and file even after the applicable due date as the IRS will take such action into consideration when determining whether to abate penalties.
Additionally, the Notice provides that good faith reporting standards will apply once again for 2017 reporting. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith efforts to comply with the 2017 Form 1094 and 1095 information-reporting requirements. This relief applies to missing and incorrect taxpayer identification numbers and dates of birth, and other required return information. However, no relief is provided where there has not been a good faith effort to comply with the reporting requirements or where there has been a failure to file an information return or furnish a statement by the applicable due date (as extended).
Finally, an individual taxpayer who files his or her tax return before receiving a 2017 Form 1095-B or 1095-C, as applicable, may rely on other information received from his or her employer or coverage provider for purposes of filing his or her return.
Florida is raising its minimum wage to $8.25 an hour beginning Jan. 1, up 15 cents from $8.10 in 2017. For tipped employees, the minimum wage will be at least $5.23 an hour.
The minimum wage rate is recalculated each year on Sept. 30, based on the Consumer Price Index.
Employer found liable for intentionally violating minimum wage requirements are subject to a fine of $1000 per violation, payable to the state in addition to potential civil action law suit.
Be sure to update your required Florida Minimum Wage Posting to reflect this change. You can download a copy of the new poster here.
IRS has begun notifying employers of their potential liability for an ACA employer shared responsibility payment in connection with the 2015 calendar year. It recently released Forms 14764 and 14765, which employers can use to dispute the assessment.
The Affordable Care Act (ACA) imposes employer shared responsibility requirements that are commonly referred to as the “employer mandate.” Beginning in 2015, applicable large employers (ALEs) – generally, employers with at least 50 full-time employees – are required to offer minimum essential coverage to substantially all full-time employees and their dependents, or pay a penalty if at least one full-time employee enrolls in marketplace coverage and receives a premium tax credit. Even if they offer employees coverage, ALEs may still be subject to an employer shared responsibility payment if the coverage they offer to full-time employees does not meet affordability standards or fails to provide minimum value.
The IRS announced their plans in Fall of 2017 to notify employers of their potential liability for an employer penalty for the 2015 calendar year. It released FAQs explaining that Letter 226J will note the employees by month who received a premium tax credit, and provide the proposed employer penalty. Additionally, the IRS promised to release forms for an employer’s penalty response and the employee premium tax credit (PTC) list respectively.
IRS subsequently issued Form 14764, the employer penalty Response, and Form 14765, the Employee PTC Listing. Together, these forms are the vehicle for employers to respond to a Letter 226J.
On Form 14764, employers indicate full or partial agreement or disagreement with the proposed employer penalty, as well as the preferred employer penalty payment option. An employer that disagrees with the assessment must include a signed statement explaining the disagreement, including any supporting documentation. This form also allows employers to authorize a representative, such as an attorney, to contact the IRS about the proposed employer penalty.
On Form 14765, the IRS lists the name and last four digits of the social security number of any full-time employee who received a premium tax credit for one or more months during 2015 and where the employer did not qualify for an affordability safe harbor or other relief via Form 1095-C. Each monthly box has a row reflecting any codes entered on line 14 and line 16 of the employee’s Form 1095-C. If a given month is not highlighted, the employee is an assessable full-time employee for that month – resulting in a potential employer assessment for that month.
If information reported on an employee’s Form 1095-C was not accurate or was incomplete, an employer wishing to make changes must use the applicable indicator codes for lines 14 and 16 described in the Form 1094-C and 1095-C instructions. The employer should enter the new codes in the second row of each monthly box by using the indicator codes for lines 14 and 16. The employer can provide additional information about the changes for an employee by checking the “Additional Information Attached” column. As mentioned:
Employers: Carefully Consider 226J Letter Responses
Miscoding can happen for different reasons, including vendor errors and inaccurate data. To minimize risk of additional IRS exposure, employers should carefully consider how best to respond to a 226J letter given circumstances surrounding the disputed assessments. For example, changing the coding on the 1095-C of an employee from full-time to part-time could trigger further review or questions by the IRS on the process for determining who is a full-time employee – and may increase the likelihood of IRS penalties for reporting errors on an employer’s Form 1095-Cs.
In its October FAQs, the IRS stated that it “plans to issue Letter 226J informing ALEs of their potential liability for an employer shared responsibility payment, if any, in late 2017.” If the IRS sticks to that timing, all notices should be sent out by the end of this calendar year. However, because the IRS has not indicated that it will inform employers that they have no employer penalty due, it is impossible to say that an employer not receiving a Letter 226J in 2017 is home free for 2015 employer penalties.
Employers should review the newly released forms so they are prepared to respond within 30 days of the date on the Letter 226J. They should also ensure processes are in place to make these payments, as necessary. Even employers who are not expecting any assessments will need to prepare to respond to the IRS within the limited timeframe to dispute any incorrect assessments.
With the Holiday Season in full swing, many employers inquire about holding company parties where alcohol will be served. They generally want to know about the risk involved if an employee drinks too much at the party and misbehaves, or worse, injures or kills someone on the way home.
There is always risk involved in holding a company sponsored event. Serving alcohol only compounds the potential for problems. According to one study, 36% of employers reported behavioral problems at their most recent company party. These problems involved everything from excessive drinking to off-color jokes to sexual advances to fist fights. As a result, more and more employers now hold alcohol-free parties. Since most employers still want to hold holiday parties, you can reduce your legal liability by observing as many of the following recommendations as possible:
10. If possible, don’t serve alcohol. This is easier to do if you simply have a catered lunch at the company office.
9. Invite spouses and significant others so there will be someone there to help keep an eye on your employees and, if necessary, get them home safely.
8. Always serve food if you serve alcohol and always have plenty of non-alcoholic beverages available.
7. If your party is a dinner, consider serving only wine or beer (plus non-alcoholic alternatives) with the meal.
6. If you do serve alcohol, do not have an “open bar” where employees can drink as much as they want. Instead have a cash bar or use a ticket system to limit the number of drinks. Close the bar at least an hour before you plan to end the party. Switch to coffee and soft drinks from there on.
5. Let your managers know that they will be considered to be “on duty” at the party. They should be instructed to keep an eye on their subordinates to ensure they do not drink too much. Instruct managers that they are not to attend any “post party” parties.
4. Consumption of alcohol lowers inhibitions, and impairs judgement. This can result in employees saying and doing things that they would not ordinarily do. Remind employees that, while you encourage everyone to have a good time, your company’s normal workplace standards of conduct will be in force at the party, and misconduct at or after the party can result in disciplinary action.
3. Hire professional bartenders (don’t use supervisors!) and instruct them to report anyone who they think has had too much. Ensure the bartenders require positive ID from guests who not appear to be substantially over age 21.
2. Arrange for no-cost taxi service for any employee who feels that he/she should not drive home. At management’s discretion, be prepared to provide hotel rooms for intoxicated employees.
1. Never, never, hang mistletoe! Take a loo at item #4 again and you will see why.
Article courtesy of Fisher & Phillips LLP
As we near closer to Thanksgiving, it’s safe to say we are in “late 2017” territory. Last week, the IRS issued new FAQ guidance informing employers that they can expect notice of any potential ACA employer mandate pay or play penalties in late 2017.
What Will the Letter Look Like?
The IRS recently posted a copy of the Letter 226J here: https://www.irs.gov/pub/notices/ltr226j.pdf
Letters Will Look Back to 2015
The ACA employer mandate pay or play rules first took effect in 2015. The IRS Letters 226J at issue will relate only to potential penalties in that first year, and therefore they will be relevant only to employers that were applicable large employers (ALEs) in 2015.
In general, an employer was an ALE in 2015 if it (along with any members in its controlled group) employed an average of at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year (2014).
Note that a special 2015 transition rule provided that certain “mid-sized” employers between 50 and 100 full-time employees could have reported an exemption from potential pay or play penalties.
What Are the Potential 2015 Penalties?
a) §4980H(a)—The “A Penalty” aka No Coverage Offered
This is the big “sledge hammer” penalty for failure to offer coverage to substantially all full-time employees. In 2015, this standard required an offer of coverage to at least 70% of the ALE’s full-time employees. (For 2016 forward, this standard has been increased to 95%).
The 2015 A Penalty was $173.33/month ($2,080 annualized) multiplied by all full-time employees then reduced by the first 80 full-time employees (reduced by the first 30 full-time employees for 2016 forward). It was triggered by at least one full-time employee who was not offered group coverage enrolling in subsidized coverage on the Exchange.
The reduced 70% threshold for the 2015 penalty should be sufficient for virtually all ALEs in 2015 to avoid the A Penalty, provided they offered a group health plan with eligibility set at 30 hours per week or lower. It would be very unlikely for a surprise A Penalty to arise for 2015.
b) §4980H(b)—The “B Penalty” aka Coverage Not Affordable
This is the much smaller “tack hammer” penalty that will apply where the ALE is not subject to the A Penalty (i.e., the ALE offered coverage to at least 70% of full-time employees in 2015, or 95% thereafter). It applies for each full-time employee who was not offered coverage, offered unaffordable coverage, or offered coverage that did not provide minimum value and was enrolled in subsidized converge on the Exchange.
The 2015 B Penalty was $260/month ($3,120 annualized). Unlike the A Penalty, the B Penalty multiplier is only those full-time employees not offered coverage (or offered unaffordable or non-minimum value coverage) who actually enrolled in the Exchange. The multiple is not all full-time employees.
What Happened to My Section 1411 Certification?
In the vast majority of states, they never came!
In short, the 1411 Certification (typically referred to as Employer Exchange Notices) informs the employer that one or more of their employees have been conditionally approved for subsidies (the Advance Premium Tax Credit) to pay for coverage on the exchange.
One important purpose of the notice is it provides employers with the chance to contemporaneously challenge the employee’s subsidy approval. Near the time of the employee’s subsidy approval, the ALE can show that it made an offer of minimum essential coverage to the full-time employee that was affordable and provided minimum value.
In other words, the notices provide the ALE with the opportunity to prevent the employee from incorrectly receiving the subsidies, and the ALE from ever receiving the Letter 226J from the IRS (because all ACA pay or play penalties are triggered by a full-time employee’s subsidized Exchange enrollment).
CMS admitted in a September 2015 FAQ that they were not able to send the notices for 2015 for federal exchange enrollment (most state exchanges took the same approach), but the potential penalties will nonetheless still apply.
The result is that ALEs will for be receiving their first notice of potential 2015 penalties via IRS Letter 226J in “late 2017.”
How Does the IRS Determine Potential Penalties?
The 2015 ACA reporting via Forms 1094-C and 1095-C (as well as the employee’s subsidized exchange enrollment data for 2015) serve as the primary basis for the IRS determination.
What Do I Need to Do?
First of all, review the information carefully.
The first-year ACA reporting for 2015 was a particularly difficult one, and one in which the IRS provided extended deadlines and a good faith efforts standard. It is very possible that the numerous challenging systems issues that made the first-year (and, frankly, all subsequent years) ACA reporting so difficult resulted in certain inaccuracies on the 2015 Forms 1094-C and 1095-C.
Be sure to review any potential penalties carefully with your systems records to confirm the reporting was correct.
a) If You Agree with the Penalty Determination – You will complete and return a Form 14764 that is enclosed with the letter, and include full payment for the penalty amount assessed (or pay electronically via EFTPS).
b) If You Disagree with the Penalty Determination – The enclosed Form 14764 will also include a “ESRP Response” form to send to the IRS explaining the basis for your disagreement. You may include any documentation (e.g., employment or offer of coverage records) with the supporting statement.
The response statement will also need to include what changes the ALE would like to make to the Forms 1094-C and/or 1095-C on the enclosed “Employee PTC Listing,” which is a report of the subsidized Exchange enrollment for all of the ALE’s full-time employees. The Letter 226J includes specific instructions on completing this process.
The IRS will respond with a Letter 227 that acknowledges the ALE’s response to Letter 226J and describes any further actions the ALE may need to take. If you disagree with the Letter 227, you can request a “pre-assessment conference” with the IRS Office of Appeals within 30 days from the date of the Letter 227.
If the IRS determines at the end of the correspondence and/or conference that the ALE still owes a penalty, the IRS will issue Notice CP 220J. This is the notice and demand for payment, with a summary of the pay or play penalties due.