The IRS is hiring! They have hired 700 new agents this year alone to enforce the Affordable Care Act. Many employers just think that nothing will happen to them. But these new laws are being enforced and your charter school will be audited too.
So you offer health insurance to your full time staff. What is considered full time at your charter school? In years past, full time meant 40 hours. But the ACA says full time is 30 hours. Do you have variable hour employees? If those employees are working 30 hours or more, you must offer them health insurance.
Let’s say an employee works 30 hours and the school only covers 80% of the cost of health insurance. This employee does some research herself and finds out that she qualifies for a subsidy on the Exchange because her income falls within the guidelines. Her cost for health insurance on the Exchange with the subsidy comes out to be less than what her payroll deduction would be at the school. So she decides to not enroll in the benefits at your school and does not complete any paperwork. She then goes to the Exchange, purchases health insurance on her own, collects the subsidy and is happy because she is paying less than through her charter school.
Well here’s the problem. She does not qualify for a subsidy on the Exchange. Why? That’s because her employer (your charter school) offered her affordable coverage. However, she marked off a wrong box on the website saying she wasn’t offered affordable coverage because it wasn’t affordable she thought. It cost less on the Exchange so the Exchange was affordable but her employer’s plan was not. Can you see how many employees will think this same way?
So since she collected a subsidy on the Exchange and the IRS knows she is employed by your charter school, the IRS is going to send your charter school a notice. This notice will include a fine. The IRS will automatically assume that you did not offer her coverage and remember, your employee did not complete any paperwork or a waiver. So you have no proof that coverage was offered to this employee. This is why it is very important to obtain a waiver form for each employee that does not enroll in the benefits.
These are the notices that you may be receiving in the mail in the next few months:
- Marketplace Notice
These notices come from the Marketplaces (i.e., Exchanges) and are sent to employers who have an employee that is deemed eligible for a premium tax credit or cost-sharing subsidy. The Federally-facilitated Marketplaces have just started sending out these notices. Covered California plans to start sending out notices in the Fall of 2016. Other states with State-based Exchanges may have also started sending out notices.
Employers may appeal the determination. They are not required to do so. Not appealing will have no impact on whether an Employer Mandate penalty is assessed by the IRS. The appeals process for Federally-facilitate Marketplaces is through HHS. Some State-based Exchanges are also using HHS, including Covered California, but others will handle their own appeals.
- IRS Notice
The IRS will separately send notices to employers to inform them that they may be assessed a penalty under the Employer Mandate. The IRS has not provided dates when these notices will start to be sent but it’s anticipated they will start in November 2016 at the earliest. Employers will have an opportunity to respond to the notice before any Notice and Demand for Payment is issued.
To view an example of the notices that you may receive in the mail, click the download now image below.
If you have any questions regarding these marketplace notices or need any assistance with your employee benefits for your charter school, please contact me at (760) 622-6080 or by using my Contact Form. You may also contact me through any of my social media accounts.