As announced in our blog last fall, the first round of IRS 226J letters were slated to begin rolling off the presses at the IRS. The 226J letters are the communication put out by the IRS informing applicable large employers that they have been pegged as potentially liable for an employer shared responsibility payment (aka Section 4980(H) penalty). As a reminder, the employer shared responsibility mandates of the Affordable Care Act generally apply to employers that employ 50 or more full-time employees and these employers are referred to as applicable large employers (“ALE”). ALEs could be liable for an employer shared responsibility payment (“ESRP”) if at least 1 full-time employee was allowed a premium tax credit because the ALE did not offer minimum essential coverage (“MEC”) to at least 95% of its full-time employees OR if the ALE did offer MEC, but the coverage was deemed to be unaffordable or did not provide minimum value.
ACTION IS REQUIRED
If an ALE receives a 226J letter, a response is required within 30 days even if you are not disputing the letter so it’s important to be prepared to take action if a 226J letter lands in your mailbox!
As a reminder, the penalties relating to a Section 4980(H) infraction are:
For calendar year 2015:
- the 4980(H)a penalty is $2,080
- the 4980(H)b penalty is $3,120
For calendar year 2016:
- the 4980(H)a penalty is $2,160
- the 4980(H)b penalty is $3,240
For calendar year 2017:
- the 4980(H)a penalty is $2,260
- the 4980(H)b penalty is $3,390
For calendar year 2018:
- the 4980(H)a penalty will be $2,320
- the 4980(H)b penalty will be $3,480
The IRS also has a web page entitled Understanding Your Letter 226J which may provide additional assistance.