If you are an applicable large employer, you have probably heard the horror stories about ACA noncompliance penalties, maybe you’ve even gotten one in the past.
These penalties can range in expense but they can become huge. Penalties of this size can easily cripple a business, or at least cause big cash flow issues.
Before we get started, an important term to remember is ESRP. This stands for employer shared responsibility payment. This is the requirement that employers with 50 or more employees (applicable large employers) must offer health insurance to 95% of their full time employees. This health insurance must meet minimum essential coverage and minimum value requirements.
There are two main ways that you can violate the ESRP, and those actions will result in the next two penalties.
Penalty 4980H (a)
This penalty is issued to large applicable employers that fail to offer minimum essential coverage insurance to at least 95% of their full-time employees every month of the year. This means that the employer neglected to offer employment to eligible employees.
If the IRS finds that your employee purchased a health insurance plan from the marketplace and received a tax credit from the government, you will be getting slapped with a penalty. The government doesn’t want to help fund your employee’s health insurance, they see that as your responsibility as an employer.
In 2018 an employer would have been charged $2,320 per employee. This is not per employee who was neglected, this is a charge for every employee you have minus 30. So if you have 50 employees you will be paying this penalty for 20 of them…that adds up fast!
Penalty 4980H (b)
If you are hit with this penalty then you offered your employees health insurance that wasn’t deemed affordable. An employer must offer a plan with minimum essential coverage, this equates to at least a bronze plan in the health insurance marketplace.
If your plans are not on par in terms of value then you will be stuck with a penalty. In 2018 this penalty was increased to $3,480. This penalty will be assessed by looking back at each individual month of the year that affordable insurance was not offered.
If you fail to file or distribute recipient copies, these next two penalties will be coming your way.
Failure To File
This penalty is pretty simple, if you just didn’t file or you filed incorrect information, you will be penalized. This penalty is a charge of $270 per employee. The amount per employee has increased from $260 in the prior tax year, 2017. It is possible that the penalty could be raised again for 2019, so keep that in mind if you are an applicable large employer who has received this penalty in the past.
Failure to Furnish
If you failed to distribute your 1095-C forms to your employees before the deadline...guess what? You’re getting a penalty. This penalty is also $270 per employee.
Let’s be real… there are so many employers that are still struggling with ACA guidelines. Tackling this reporting on your own can lead to big penalties, even when it comes to small mistakes. If you are an applicable large employer or PEO that wants to guarantee their ACA compliance without putting in any extra work, then check out ACAwise!
ACAwise is your full service reporting solution. You send us your business’ information and we generate your forms for you! Do you have penalties for past years? We can help you file these past years properly and lower your penalties with the IRS!