Over the course of 2016, the ACA Times has reported on ways for employers to comply with mandates of the Affordable Care Act in an effort to avoid paying large penalties to the government. It was fair warning, as many employers found difficulty in preparing and collecting the proper paperwork and proof of offer of affordable coverage to their employees.
Penalties are expected down the line, as the offer must meet minimum essential coverage, satisfy minimum value and affordability, and be properly reported to the IRS. While it is expected that some employers would let their compliance slip through the cracks and be exposed to penalties, in a new study conducted by Accenture, the estimates for penalties are way more than expected.
To quote our president-elect, the quantities are “huge."
The Congressional Budget Office estimated that 2016 penalties for Part A and Part B penalties for failing to offer the required minimum essential coverage that satisfies minimum value and affordability would be around $21 billion.
Accenture’s own study has tacked on another $10 billion to that estimate to account for reporting penalties, making it close to 50% more than forecasted.
The reason, per Accenture, is the “unintentionally non-compliant,” which are those employers who offered minimum essential coverage that satisfies minimum value and affordability but failed to comply with the reporting requirements of the ACA’s employer mandate.
The penalties for failing to make a compliant offer fall under two potential categories, the Part A” penalty (Section 4980H(a) of the Internal Revenue Code), under which ALE’s must provide minimum essential coverage to 95% of their full time employees and the Part B” penalty (Section 4980H(b) of the Internal Revenue Code), under which the ALE’s offer of minimum essential coverage to full time employees must also satisfy minimum value and affordability.
The former runs around $2,160 in penalties per full time employee, the latter $3,120.
The reporting penalties, which are for failures in filing with the IRS or furnishing to applicable employees, have been thoroughly discussed in other posts by the ACA Times.
In summary, these reporting penalties, which are under 6721 and 6722 of the Internal Revenue Code, can be as low as $50 per return for a delay in filing or furnishing of no more than 30 days to $520 per return for intentional disregard. When the total number of returns are considered, this number can sky rocket.
These unexpected penalties may come as a shock to employers, especially those who have never experienced these ACA violations and penalties before.
While Accenture’s figure is only an estimate of the reporting penalties—and can excuse a percentage of that total due to those employers who can demonstrate good faith —it’s certainly yet another warning for employers to ensure compliance, as penalties can creep up when they least expect it.
Here are free resources to help your business with the quickly approaching ACA reporting deadline.