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The Biden administration is once again finding ways to bolster the Affordable Care Act. This time the advancement comes in the form of ACA subsidies and the costs of healthcare obtained through state and federal health exchanges.
In the newly released $1.8 trillion American Families Plan proposal, the administration seeks to make the expansion around Premium Tax Credit (PTC) eligibility permanent. Specifically, the plan would allow Americans with income up to 150% of the Federal Poverty Level (FPL) to obtain silver quality health plans for $0 monthly premiums, as well as pay significantly reduced deductible costs, indefinitely.
In addition, the American Families Plan would also expand ACA subsidized coverage to Americans who earn 400% and above the FPL and caps the amount they would have to contribute on a monthly basis to 8.5% of their household income.
Both of these changes to PTCs and healthcare coverage were signed into law via the American Rescue Plan but are only slated to run through December 2022.
Regarding the request to make the expansion around ACA subsidized healthcare eligibility permanent, senior White House administration said in a briefing, “These credits are providing premium relief that is lowering health insurance costs by an average of $50 per person per month for nine million people, and will enable four million uninsured people to gain coverage.”
The American Families Plan proposal does not include the expansion of Medicare and is what some are calling a missed opportunity. The criticisms come from Biden’s previous promise to “lower the eligibility age from 65 to 60.” The plan proposal does however include language regarding Medicare being able to negotiate prices, “creating a public option … and closing the Medicaid coverage gap to help millions of Americans gain health insurance.” It remains to be seen how the administration will handle healthcare plans moving forward and whether a single-payer option and Medicare expansion will take effect.
Also outlined in the proposal and of significant importance for employers is the request for increased IRS authority. Specifically, the proposal is seeking to give the IRS authority to regulate paid tax preparers. According to the official American Families Plan Fact Sheet, “Tax returns prepared by certain types of preparers have high error rates. These preparers charge taxpayers large fees while exposing them to costly audits. As preparers play a crucial role in tax administration, and will be key to helping many taxpayers claim the newly-expanded credits, IRS oversight of tax preparers is needed. The President is calling on Congress to pass bipartisan legislation that will give the IRS that authority.”
This authority would largely help the IRS allocate resources accordingly and allow the agency to focus on one of Biden’s top priorities; enforcement.
Politico writes that the American Families Plan package “would be paid for by increasing the top tax rate, hiking the capital gains tax and dramatically stepping up IRS enforcement of tax evasion.” This information aligns with Biden’s recent FY22 discretionary request of almost $1 billion in additional funding for IRS enforcement efforts.
For employers, that means we can expect a significantly strengthened and revitalized IRS moving forward. Among its enforcement priorities are the Employer Shared Responsibility Provisions (ESRP), also known as the Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) organizations with 50 or more full-time employees and full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
The IRS is currently issuing Letter 226J to employers identified as having failed to comply with the ACA’s Employer Mandate for the 2018 tax year. And with 2020 being the final year for Good-Faith Relief for filing and furnishing under Sections 6056 and 6056, ACA penalty assessments abound.
With IRS enforcement escalating, the pool of Americans eligible for PTCs a guaranteed increase for the remainder of 2021, 2022, and possibly beyond, employers should revisit their ACA compliance process to get a leg up. Download the 2021 ACA 101 Toolkit to learn about the penalty assessments for the 2021 tax year and important dates you won’t want to miss for 2021 ACA reporting, to be filed in the 2022 tax year.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.