Letter 226-J is sent to ALEs who fail to comply with MEC as required by the ACA’s employer mandate.
Wait…that’s a lot of acronyms. What did you say?
- Letter 226J – A penalty letter sent by the IRS with a thirty-day turnaround time to reply. The letter is sent to an ALE who has an employee receive a premium tax credit from a state or federal health exchange for one or two months. Letter 226-J is sent based upon data completed by an ALE on Forms 1094-C and 1095-C.
- ALE – Applicable Large Employer: an employer with 50 or more full-time and full-time equilivent employees
- ACA Employer Mandate – Under this mandate, ALE are required to offer Minimum Essential Coverage (MEC) to at least 95% of the full time workforce. Such coverage must meet Minimum Value (MV) and be affordable or be subject to IRS penalties. Click to learn more on The Dashboard about what it means to offer MEC that is affordable.
I’m an ALE; what do I need to remember?
- Be sure to accurately and timely complete Forms 1094-C and 1095-C. Here’s an earlier CD Blog outlining What to Know for 2020.
- Confirm ACA reporting deadlines for 2020 taxes; why? The pandemic may have affected employee status regarding full-time employment and number of hours worked. This is likely to affect reporting of who was covered by plans.
- If you receive a Letter 226-J, read it carefully, consider review by counsel, and respond promptly.
- For additional detail, here’s a link to the IRS’ website on Understanding your Letter 226-J