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IRS Updates Guidance on Employer Shared Responsibility, Including 2018 Penalty Amounts



Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act

The IRS has updated Q&A guidance on its webpage relating to Code § 4980H employer shared responsibility for applicable large employers (ALEs). Here are highlights:

  • 2018 Adjusted Penalty Amounts. In Q/A-54, the IRS has announced the adjusted penalty amounts per full-time employee for Code § 4980H failures occurring in the 2018 calendar year—$2,320 under Code § 4980H(a) and $3,480 under Code § 4980H(b).
  • Adjustment to Affordability Standard. Q/A-39 has been updated to reflect the 2018 indexing adjustment for the required contribution percentage used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility (see our Checkpoint article). The affordability threshold for 2018 is 9.56%.
  • Expired Transition Relief. Q/A-2 notes that no transition relief is available for 2017 and future years. Transition relief that was available for the 2015 plan year (including months falling in 2016 for non-calendar-year plans) has now expired.

EBIA Comment: As a reminder, the IRS has begun sending Letter 226J to inform ALEs of their potential liability under Code § 4980H for the 2015 calendar year—the first-ever assessment of employer shared responsibility penalties (see our Checkpoint article). Employers and their advisors should be on the lookout for this letter so that they are prepared to promptly review and respond to such correspondence. Various forms of transition relief applied for purposes of Code § 4980H for the 2015 plan year; ALEs receiving a proposed penalty assessment should review the relief to determine whether penalties may be avoided or reduced. For more information, see EBIA’s Health Care Reform manual at Sections XXVIII (“Shared Responsibility for Employers (Play or Pay Penalty Tax)”) and XXXVI.D (“Information Reporting of Employer-Sponsored Coverage (Applicable Large Employers)”). See also EBIA’s Form 1094/1095 Workbook at Section XV (“Penalty Assessment”).

Contributing Editors: EBIA Staff.

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