Monterey County Farm Bureau

Affordable Care Act

ACA Employer Penalty Assessments coming in late 2017

On November 2, the Internal Revenue Service (IRS) issued revised FAQs on the employer shared responsibility provisions under the Affordable Care Act (ACA). Question sets 55-58 now detail the procedure the IRS will use to begin issuing proposed penalty assessments to employers that failed to comply with these provisions in 2015. Though the IRS was previously silent on the details of penalty assessments, this new information serves as a reminder to employers that compliance enforcement is a priority for the IRS.

Employer Shared Responsibility Provisions

Under the ACA's employer shared responsibility provisions, Applicable Large Employers (ALEs) are required to offer health coverage to full-time employees and their dependents that both provides minimum value and is affordable. Penalties may be assessed against an employer that either fails to offer health coverage to enough of its full-time employees and dependents, or offers coverage that fails to provide minimum value and/or meet affordability standards, and has at least one full-time employee qualify for a premium tax credit.

Penalty Assessment Process

The IRS will use Letter 226J to notify employers that it determines, for at least one month of the year, had a full-time employee enrolled in a health plan for which a premium tax credit was allowed. The Letter will include an estimated monthly penalty amount along with a list of full-time employees for whom the penalty applies. Information provided by the employer on 2015 ACA reporting Forms 1094- and 1095-C will be used by the IRS to make these determinations. The IRS intends to issue Letters 226J for the 2015 year in late 2017.

An employer that receives a Letter 226J will have an opportunity to respond to the IRS in writing to either agree with or dispute the IRS's proposed assessment. In the event a penalty is ultimately assessed, the employer will receive Notice CP220J and will need to make its payment pursuant to the instructions included therein.

Action Items

While it's too late for employers to enact compliance strategies that could prevent a 2015 penalty assessment, there are several important considerations for employers going forward:

  • If a Letter 226J is received, employers have 30 days to respond to the IRS, in writing, that the employer either agrees with the assessment or disagrees, in whole or in part. Failure to timely respond to will result in an automatic assessment of the IRS's proposed penalty amount.
  • Employers should designate a contact person within the organization to handle responses to the IRS should a Letter be received.
  • Accurate record-keeping will be essential, both for past and future years.
  • The IRS now has a process through which to administer penalties. Thus, employers should take seriously their ongoing obligations under the ACA, including 2017 ACA reporting.

Courtesy of Felice Insurance


Responding to an IRS - SSA - CMS Data Match Request

Employers may receive a request from the Centers for Medicare & Medicaid Services (CMS) prompting the submission of group health plan information to support the IRS/SSA/CMS Data Match Project. The Data Match Program is designed to facilitate shared access to data between the Internal Revenue Service (IRS), the Social Security Administration (SSA), and CMS. The shared data allows each agency to pool information on Medicare beneficiaries who also have coverage under a group health plan, and make determinations as to the coordination of benefits between the two. Cooperation by employers is required by law, and the failure to properly respond to the request within 30 days of receipt may result in the imposition of penalties in the amount of $1,000 per individual listed in the letter.

Reason for the Request

Most often, an employer will receive a Data Match Request because a group health plan participant who also has Medicare coverage incurred medical expenses and submitted claims. In this instance, Medicare will need to determine whether it should pay the claim as primary or secondary to the group health plan according to Medicare Secondary Payer Rules.  CMS acknowledges that the request may be burdensome to some employers, but promotes the cost savings to employers, Medicare beneficiaries, providers, and Medicare as a worthy cause.

Required Information

The information requested for the Data Match is not exhaustive. Employers must provide group health plan information on specifically-named individuals (either an employee or a spouse). Employers will need to confirm that the named individual was employed and/or covered under the group health plan at the time a claim was incurred. Additional information about the type of coverage is also required.

How to Submit the Data

Submissions may be made online at the IRS/SSA/CMS Data Match Secure Website, either through the direct entry of data or through an electronic questionnaire. Employers also have the option to request a 30-day extension of time to submit the requested data. Instructions on how to complete the Data Match can be found here, along with information on Voluntary Data Sharing Agreements that an employer may enter into with CMS in lieu of completing future Data Match Requests.

Courtesy Felice Insurance (Author: Deborah Hyde, Front Page Post)


Covered California, the health insurance marketplace for Californians not covered by employer-sponsored health insurance programs, is now open for business (started on October 1, 2013).  Coverage began on January 1st, 2014 for plans purchased throught this marketplace; there is an open enrollment period each year, genearlly from October through February.

SHOP, the small business health options plan, will be available to companies with up to 50 employees, with tax credits up to 50% for some employers (under 25 enrollees).  SHOP is offering up to 30 different group health plans.  Features of this program are that employers will not be subject ot risk-loss adjustment factors, plans that are on a level playing field with small group plans offered outside SHOP.

For more information, log onto www.eindividualhealth.com or visit www.CoveredCA.com.

Consumers in both the individual and SHOP market can purchase insurance plans directly from Covered California, or they can use the services of an agent that has been certified by Covered California, formally titled a Certified Insurance Agent (their services are free to consumers as they are paid by insurance carriers at the same rates inside or outside of the exchange).


Employers are required, beginning on October 1, 2013, to provide the insurance exchange notice to each new employee at the time of hiring.  For 2014, the U.S. Department of Labor will consider the notice to be delivered timely if it is provided within 14 days of an employee's start date.  On September 12, 2013, the DOL announced they would not assess penalties to employers for failing to provide this notice, but employers are still encouraged to provide this notice to their employees.  Sample notice lanaguage can be found here.


Additional resources can be found on the U.S. Department of Labor website here.