If you think navigating the Affordable Care Act (ACA) from an employer's perspective can be intimidating, you're not alone. With the filing of 1094s and 1095s for the 2015 tax year behind you, HR and benefits professionals are faced with tackling the next ACA compliance hurdle: managing employee subsidy notifications and appeals.
The Federal and some State Exchanges have already begun sending notifications, leaving many organizations to sort through a multitude of additional ACA complexities, not to mention paperwork. Now is the time to make sure you're prepared to handle this new process of managing subsidy appeals. Why? Because when a subsidy – also known as an Advance Premium Tax Credit – is awarded, it may trigger an IRS fine down the road.
To make sure you're best prepared, you'll want to understand 4 key steps in the process:
|Step 1: Employer receives a notice
If your employee applies for and receives a subsidy, you will be mailed a notice. To clarify, this will be a hard copy sent via the postal service (electronic notices will likely happen in the future). The process gets tricky very quickly, as notifications will be mailed to the address the employee listed on their subsidy application, which may be their work location and not your headquarters or HR location. Because you only have 90 days from the date on the notification to respond, you'll want to make sure notices can quickly and efficiently be directed (or re-directed) to the right location and contact.
|Step 2: To appeal or not to appeal?
When the notification finally hits your desk, you'll want to review it and decide whether or not you want to appeal the subsidy. Ask yourself questions like, “Was this employee actually eligible for benefits? Did we offer this employee minimum essential coverage (MEC)? Did our coverage meet both the affordability and minimum value requirements?”.
Appealing a subsidy isn't necessarily harmful to an employee. In fact, you may be helping the employee out. If they received a subsidy and weren't supposed to, they may need to repay some (or all) of the subsidy amount back when they file their taxes – an expense they may not be prepared to take on.
Appealing may also help prevent unwarranted fines from impacting your organization down the road.
Step 3: Filing an appeal
Once you've decided it's appropriate to file an appeal, you'll next complete and submit appeal forms and documentation to the appropriate Exchange within the 90 days of the date on the notice. Keep in mind that forms can vary between Federal and State Exchanges. The Employer Appeal Request Form, which is used by the Federal and most State Exchanges, will ask for information about your organization, the employee whose subsidy you're appealing, and why you're appealing it. Once sent, the Exchange will notify both you and the employee that the appeal was received.
|Step 4: Appeal is reviewed, a decision is made
The Exchange will now review your case and make a decision. In some cases, the Exchange may choose to hold a hearing. When a decision is finally reached, both you and your employee will be notified. However, it doesn't necessarily end there. Your employee is entitled to their opportunity to appeal the Exchange's decision with the Department of Health and Human Services (HHS). If HHS opts to hold a hearing, you may be called to testify. In this situation, HHS will review the case and make a final decision. If HHS finds that your employee isn't eligible for the subsidy, your employee may have to repay the subsidy amount. Or, if HHS finds the employee is indeed eligible for the subsidy, it's critical for you to keep your appeal on file since this may result in a fine from the IRS.
Think this sounds complicated? Again, you're not alone. In a recent survey conducted by Equifax, 30% of respondents cited spending 240+ hours (that's 30+ days!) on ACA management, including employee subsidy notifications. This particular piece of managing compliance can become a substantial time investment, yet if not managed well, there could be additional impacts in the form of fines down the road. Set yourself, your HR team, and your employees up for success by ensuring you have the proper knowledge, processes, and technology in place to most effectively handle ACA subsidies.
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