Recently, the IRS began steppingup its enforcement of the ESR provisions, expanding its focus toinclude sending notifications to non-filers andinaccurate/incomplete filers. (Photo: ALM)

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There's no dancing around the fact that health care remains one of the most complex,yet critical, issues for employers to manage.

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Due to an ever-changing regulatory landscape in all levels ofgovernment, many of today's business owners may not know whichAffordable Care Act (ACA) rules still apply to them. As a result,some are facing significant consequences for non-compliance.

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Currently, under the ACA's employer shared-responsibility (ESR)provisions, certain employers (called “applicable large employers”or ALEs) must either offer minimum essential coverage that is both“affordable” and provides “minimum value” to their full-timeemployees (and their dependents adequate coverage), or potentiallypay a large employer shared responsibility (ESR) penalty to the IRS if at least one full-timeemployee receives a premium tax credit after purchasing healthinsurance in a government marketplace.

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Related: How to help employer clients with IRS Letter226J

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Additionally, ALEs must report information about the coveragethey offer their full-time employees—defined as working at least 30hours per week—as it relates to provisions under section 4980H ofthe Internal Revenue Code (IRC). This information is filed on Forms1094-C and 1095-C. If businesses do not furnish or file thisinformation accurately and timely, they might be subject toreporting penalties. In addition, for self-insured ALEs, the formscurrently include reporting on all individuals covered under theemployer plan, i.e. dependents as well as participants.

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Recently, the IRS began stepping up its enforcement of the ESRprovisions, expanding its focus to include sending notifications tonon-filers and inaccurate/incomplete filers, who began receivingthem at the end of 2017.

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Employers should be prepared for how to handle a notice from theIRS that alleges they did not meet the reporting requirements underthe ESR provision of the ACA. Fines can be financially devastating, upwardsof $1M+ in some cases. These notices cannot and should not beignored, as quick action is the best interest of any employer.There is only potential good faith relief for filing inaccurately,not for failure to file at all.

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Here is a quick checklist to keep in mind if you're an employerand find yourself facing an IRS penalty notice:

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If you work with a payroll, HR services and/or ACA reportingprovider, contact them first. They will work with you to helpnavigate the complexity of the process.

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Whether or not you have a provider or manage these issuesinternally, don't delay. Request an extension to allow ample timeto review and collect applicable data/documentation and take timeto understand your assessment.

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Determine if there were errors in filing and, if so, take thefollowing steps:

  1. Research past years to determine what should have beenfiled
  2. Make corrections to the form within the notice
  3. Follow the response process outlined in the IRS notice toinclude a letter of explanation and reasonable documentation thatthe changes are valid.
  4. Send all information to appropriate IRS address before the duedate.

While a potentially daunting task, employers should ensure theyare filing accurately the first time to avoid the trouble of havingto seek out that information years after the fact. Researching,correcting, and responding to the IRS later can be a much morecomplex and time-consuming process.

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Bottom line: if you do find yourself in this predicament, it iscritical to quickly identify resources with the information andexperience to help you respond to the IRS notice.

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John Sobraske is senior product manager forinsurance services at Paychex.

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