Perhaps the best-known ACA requirement for organizations is the employer shared responsibility mandate – otherwise known as the “pay or play” mandate. Put simply, under the rules of the ACA, applicable large employers (ALEs; 100+ employees in 2015) must provide affordable minimum essential coverage to at least 70% of their employees (95% in 2016). If this requirement is not met, either because 1) no coverage is offered; or 2) because coverage is determined not to be affordable and/or does not meet minimum value, then organizations will be responsible for hefty penalty fees.
While this may sound simple and straightforward on paper, in practice it is anything but. On top of determining if penalties are owed for the above and how much (using a somewhat complicated formula), additional penalties may apply for noncompliance with reporting requirements to the IRS, reporting requirements to employees, and W2 reporting. Unfiled returns, unfiled payee statements, and returns that are filed late are also subject to penalty fees.
Good faith does apply for these mandates in 2015, for those organizations that can show attempts to comply with the ACA and IRS legalities. But understanding the law and the exact determination of “good faith” is imperative before going into the 2016 tax season. In addition, while exclusions apply to some of the other ACA mandates, there are very few that apply to the employer shared responsibility and reporting requirements. For example, grandfathered plans often can avoid some of the ACA mandates, but they are required to comply with all of the above.
If your organization has not already become well-versed in the ACA mandates and corresponding penalties, it is strongly recommended that the process is started immediately. Understanding the intricate ins-and-outs of these new laws now may save a lot of pain – and money – down the line.
To learn more about the employer mandate and other ACA
mandates, penalties, and exclusions – as well as key terms
and deadlines related to the ACA in 2016 - download
The Nonstop Guide to ACA Penalties for the 2015 Tax Year!
The information and materials herein are provided for general information purposes only and are not intended to constitute legal or other advice or opinions on any specific matters and are not intended to replace the advice of a qualified attorney, plan provider or other professional advisor. This information has been taken from sources believed to be reliable, but there is no guarantee as to its accuracy. In accordance with IRS Circular 230, this communication is not intended or written to be used, and cannot be used as or considered a ‘covered opinion’ or other written tax advice and should not be relied upon for any purpose other than its intended purpose