It is well-known that the Affordable Care Act (ACA) imposes strict penalties on employers who fail to comply with its requirements. Annual penalties for incorrect or late filing and plan compliance can be devastating, and the penalties are increasing. With higher penalties and aggressive IRS enforcement of ACA mandates in 2019, it is more important than ever for employers to review their ACA responsibilities.
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The Cost of Noncompliance
Employers are facing increased penalties for ACA noncompliance in 2019.
- The 4980H(a) penalty is expected to increase from $2,320 per employee to $2,500 per employee. The 4980H(a) penalty is imposed on employers who fail to offer full-time (more than 30 hours) employees and their dependent children the opportunity to enroll in “minimum essential coverage” sponsored by the employer if at least one full-time employee obtains a Premium Tax Credit for insurance purchased through the Marketplace.
- The 4980H(b) penalty is expected to increase from $3,480 per employee to $3,750 per employee. The 4980H(b) penalty is imposed on employers whose plan fails to meet the “affordability” and “minimum value” requirements.
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These penalties can easily surpass $100,000 in total, making it essential to review a plan’s compliance with the ACA. Other penalties, including failure-to-file and failure-to-furnish, are expected to increase from $260 to $270 per return.
The IRS has also begun aggressive enforcement of the ACA, sending out Letter 226J penalty notices for noncompliance with the Employer Shared Responsibility Payment (ESRP) provisions 4980H(a & b) during the 2017 tax year. This comes shortly after the IRS sent out Letter 226J penalty notices for the 2016 tax year, a clear indication the IRS is intensifying their enforcement of ACA compliance.
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