Employers are starting to receive from the IRS employer mandate assessment notices for 2015. IRS Letter 226J (see https://www.irs.gov/pub/notices/ltr226j.pdf) notifies an employer that it may be liable for an Employer Shared Responsibility Payment ("ESRP"), which is sometimes referred to as the "employer mandate penalty."
Internal Revenue code Section 4980H imposes the ESRP when an employer fails to offer minimum essential coverage to its full-time employees and their dependents. An ESRP may also be imposed when an employer fails to offer affordable minimum value coverage to a full-time employee. Letter 226J requires the employer receiving the notice to respond, otherwise notice and demand for the ESRP proposed in the letter will be assessed. If the ESRP is assessed, the employer could be subject to IRS lien and levy enforcement actions.
In our experience, Letter 226J will require a response within 30 days. Employers who filed a 2015 IRS Form 1094-C should have procedures in place to watch for these notices and make sure they are promptly forwarded to the correct person. Even if an employer believes that no ESRP was owed for 2015, we are finding that many vendors who prepared the Forms 1094-C and 1095-C for 2015 made errors that are triggering the issuance of Letter 226J and it is still important to file a response. And, even if an employer believes it owes an ESRP, it may want to consult with counsel before taking any actions or failing to respond by the deadline.
If you need help in responding to a Letter 226J, please contact us. We are prepared to assist you.
© Boutwell Fay LLP 2017, All Rights Reserved. This handout is for information purposes only, and may constitute attorney advertising. It should not be construed as legal advice and does not create an attorney-client relationship. If you have questions or would like our advice with respect to any of this information, please contact us. The information contained in this article is effective as of December 29, 2017.