From Savoy Benefits 11/17/17-
A client has received Letter 226J from the IRS. This is the first client we have heard from that has been assessed and issued an employer mandate penalty. The proposed penalty is over $200,000. This employer has approximately 140 employees and offers coverage to all full-time employees and dependents using the federal poverty level (FPL) safe harbor.
Why Did the Employer Receive a Letter?
On the employer’s Form 1094-C filed for 2015, the employer left Part III, Column (a) blank. This specific question asks whether they offered coverage to at least 70% of full-time employees and children (Penalty A).
Since the question was left unanswered, the response defaulted to “No.” Additionally, they did not complete the form with transition relief, so they are receiving the 30-employee reduction rather than the greater 80-employee reduction. Four employees received a premium tax credit, which triggered the penalty.
The employer will appeal the penalty. In addition to proving that they offered minimum value, affordable coverage to the four employees who received a subsidy, they will also have to prove that they offered coverage to at least 70% of employees to avoid Penalty A.
For more information, click HERE for our detailed release on the IRS procedures for the assessment and payment of the Employer Shared Responsibility / Play or Pay Mandate penalties.