I Received A Letter From The IRS Regarding An ACA Penalty. Now What Do I Do?

Velma Williford, Consultant

Craford Benefit Consultants

If you were an Applicable Large Employer (ALE) for the 2015 tax reporting year you may be receiving a letter shortly from the IRS stating you were out of compliance with the requirements of the Affordable Care Act (ACA). The IRS letter (Letter 226J) may state that you owe a penalty for non-compliance – and that penalty may be anywhere from a couple of thousand to over a million dollars.  So – what do you do?

A quick terminology reminder – an ALE is defined as an employer with 50 or more full-time or full-time equivalent employees. Requirements of the employer mandate for 2015 included minimum benefit levels and maximum employee contribution levels, in addition to determining that benefit eligibility be no more than 30 hours per week.

So what steps should you take if you receive Letter 226J?

First, contact your broker/consultant and let them know. They should be able to assist you with your responses to the letter.

Second, if you used an outside ACA solutions provider let them know – and find out if they are going to respond to the IRS on your behalf. Remember – even if they do respond your company will be the one paying the penalty so don’t assume you won’t be held liable.

Third, you need to check the data in the letter from the IRS to make sure it is correct and agrees with your data.

Forth, regardless of if you agree with the data provided by the IRS on the letter, you are going to need to respond. The letter will dictate how you respond, but you should be prepared to respond to the IRS in writing.  You will need to respond by the date specified in the letter (typically 30 days). You should be prepared to provide documentation to substantiate your response if you are in disagreement with the data contained in the letter.

Once you have responded, you should receive an acknowledgment letter from the IRS (Letter 227).  If you disagree with a proposed or revised penalty, you can request a pre-assessment conference.  If you still disagree with the IRS after the conference you may also ask the IRS Office of Appeals to review the case.

Whatever you do – don’t ignore that letter!  If you don’t respond to the letter (with statement of disagreement and back up documentation) or if you agree with the letter but fail to respond and pay the entire penalty in the notice it can lead to additional penalty assessments, and the possibility of opening up an IRS audit.

Avoid that possible audit – and allow the Benefits Consulting staff and Human Capital staff at Craford Benefit Consultants help you respond. Call us today or simply send us an email for a free consultation.  We look forward to speaking with you soon.




About the author:

Velma is a Consultant in our San Rafael, California office. She has 29 years of experience in the insurance industry providing benefit solutions, strategic benefit planning, and high-level customer service. As a Consultant at Craford Benefits Velma’s responsibilities at Craford include strategic short and long term planning, day-to-day servicing of clients, benefits administration, open enrollment coordination and communication, plan implementation, and special project work. As an integral part of the clients’ team, she provides complex problem resolution and ongoing service and support.

Prior to joining Craford Benefit Consultants in 2009, Velma spent 2 years leading a national team of client managers at MHN (a division of Health Net), 4 years as the California Group Operations Manager with Kaiser Permanente Insurance Company, and 14 years in marketing and client management positions with brokerage consulting firms. Her combined brokerage and insurance company background bring a well-rounded insider approach to client management and problem resolution.

Velma is a graduate of the University of Phoenix with a B.S. degree in Business Management, and a Masters in Business Administration. She currently holds four professional designations, Registered Health Underwriter (RHU), Health Insurance Associate (HIA), Managed Healthcare Professional (MHP), and a Professional in Human Resources (PHR).