Heads Up About Code 4980H

August 17, 2016 Robert Sheen Health Care Coverage, Penalties, Regulations

One of the most talked about issues regarding employers and health care for their employees is under Internal Revenue Code 4980H. This Code, being Shared Responsibility for Employers Regarding Health Coverage, mandates that if a full-time employee has received a premium tax credit (PTC) or cost sharing reduction (CSR), the applicable large employer (50+ full-time or full-time equivalents) may have to make a shared responsibility payment where applicable.

This penalty can be triggered for a variety of reasons including lack of affordable health coverage offered to employees, lack of coverage that meets minimum value and for failing to offer any health coverage. The IRS has released a quick reminder in the form of an information letter that highlights some pertinent information. Here it is in a nutshell:

For a given month, full-time employees (averaging 30+ hours a week) who receive a PTC or CSR for insurance that wasn’t purchased through the Marketplace will not trigger employer penalties for that month. Meaning, an employer is not liable to make a shared payment if their FT employee did not obtain Code Sec. 36B premium tax credit or cost sharing reduction from Marketplace health insurance.

Conversely, if an employer does not provide minimum essential coverage for 95% of its FT employees, or otherwise fails to provide affordable or minimum value coverage and such an FT employee receives a premium tax credit or cost sharing reduction from health coverage purchased through the Marketplace, an employer may be penalized.

Employers have also received notices regarding certain employees who have received a premium assistance tax credit or cost sharing reduction. They are urged to contact the IRS if they find this information to be false or wish to file an appeal. If all information still suggests an employee did not receive his or her minimum essential coverage that was affordable and met minimum value and obtained Marketplace coverage instead (with receipt of a premium assistance tax credit or cost sharing reduction), employer penalties may follows.

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