Budgeting for Employer Mandate Tax Assessments

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For October 1 fiscal year employers, it’s budget season. Calendar year employers aren’t far behind. Those doubting their employer mandate compliance need to accrue reserves for non-deductible assessments that the IRS may impose in the coming year. We can help you determine your maximum exposure but we can’t tell you that you have exposure, regardless of your compliance status. Sounds crazy, right? Here’s why.

Your compliance, or not, with Code § 4980H does not alone determine your employer mandate tax assessment. At least one of your full-time employees must buy subsidized insurance through an ACA Exchange for at least one 2015 coverage month in order to trigger an employer mandate tax assessment in 2016.  The vast majority of those purchases have been made, but very few employers, in states with state-based Exchanges, have received any notice that their employees were among the purchasers.  The part of Healthcare.gov that sends those notices and resolves employer appeals still has not been built, by all published accounts.

CMS announced October 23, 2014 that paper notices would be used for 2015. Have you seen such a notice? Didn’t think so.

Of course, you could poll your full-time employees. But you shouldn’t. Knowing who had triggered potential employer mandate taxes could expose you to claims of retaliation, should you later need to discipline or fire them.

If you had received subsidy certification notices, you might have found that former employees were certified as current employees, that part-time employees were certified as full-time employees and that employees offered affordable coverage were certified as having been offered no coverage. You would have had the right to appeal those errors.  And maybe you will. We’re not holding our breath.

Increasingly, it’s looking like your first notice of employees’ 2015 subsidy certifications will be an IRS tax assessment notice in 2016.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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