Expect Increased IRS Penalties in 2019 for ACA Non-Compliance
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Expect to see increased ACA penalties for employers that do not comply with the ACA in the 2019 tax year.
Here’s how the anticipated ACA penalties for 2019 compare to the penalties of 2018 tax year:
4980H (a) Penalty
The 4980H(a) penalty, also known as the Employer Shared Responsibility Payment for Failure to Offer Minimum Essential Coverage (MEC), is anticipated to increase from $2,320 per employee in 2018 to $2,500 per employee in 2019. This penalty applies if (a) in any month in the tax year, Minimum Essential Coverage (MEC) is not offered to at least 95% of a company’s full-time employees (and their dependents), and (b) if at least one full-time employee receives the Premium Tax Credit (PTC) for purchasing coverage through the Marketplace.
Here is an example: If a company in 2019 has 300 full-time employees, and one of those employees receives a PTC for 12 months, the cost of this penalty would be $675,000 as compared to $626,400 in 2018. The per employee penalty is assessed against each of the 300 full-time employees, minus 30, even if only one employee receives a PTC. The 4980H(a) penalty is often referred to as the hammer penalty because all it takes is one full-time employee receiving a PTC for the penalty to be imposed.
4980H(b) Penalty
The 4980H(b) penalty, also known as the Employer Shared Responsibility Payment for Failure to Offer Coverage that Meets Affordability and Minimum Value (MV), is anticipated to increase from $3,480 per employee in 2018 to $3,750 per employee in 2019. This penalty is assessed if the 4980H(a) does not apply for a given month. On a monthly basis, an employer can only receive either the (a) penalty or the (b) penalty, but not both.
The 4980H(b) penalty is assessed on a monthly basis for every full-time employee that did not receive an offer of coverage or received an offer, but the offer was either unaffordable or did not provide Minimum Value (MV) or both AND the employee received a PTC for that month.
Here is an example: An employer with 10 full-time employees who each received a PTC for six months would see an IRS penalty of $18,750 as compared to $17,400 in 2018.
Failure to File Penalty
The Failure to File Penalty applies to employers who do not file correct information returns for 2019. The penalty increases from $260 per return in 2018 to $270 per return in 2019.
Here is an example: If the return is not filed by the late filing deadline of August 1, 2020, the full penalty is assessed per applicable individual return not filed. For example, an employer who failed to file returns with 300 full-time employees would see an IRS penalty of $81,000 in 2019 as compared to $78,000 in 2018.
The Failure to File Penalty amount doubles if an employer’s failure to file rises to intentionally disregard. In this same example, an employer who intentionally did not file returns with 300 full-time employees would see an IRS penalty of $162,000 in 2019.
Failure to Furnish Penalty
The Failure to Furnish Penalty applies to employers who fail to provide correct 1095-C payee statements to employees. The penalty increases from $260 per return in 2018 to $270 per return in 2019.
If the annual ACA-mandated health insurance filings are not provided to employees by the deadlines established by the IRS, the penalties are assessed per applicable individual that did not receive the information. For example, an employer who failed to provide 1095-C statements to 300 full-time employees would see an IRS penalty of $81,000 in 2019 as compared to $78,000 in 2018.
Undertaking an ACA Penalty Risk Assessment can tell you if your organization is at risk of receiving ACA penalties from the IRS.
