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The IRS Office of the Chief Counsel issued new field advice on February 24, 2020 (“Field Notice”) making it clear that there is no statute of limitations for the assessment of an Employer Shared Responsibility Payment (“ESRP”) under Internal Revenue Code Section §4980H.
Since the Employer Mandate obligations went into effect in 2015 under the Affordable Care Act, many employers have questioned how diligent the IRS will be in enforcing penalties associated with the Employer Mandate. This guidance should put that questioning to rest.
Under §4980H, the IRS assesses an ESRP when an employer of at least 50 full-time and full-time equivalent employees, also known an Applicable Large Employer (ALE) fails to offer health coverage to at least 95% of their full-time employees where such coverage meets certain requirements pertaining to the plan’s Minimum Value and affordability.
The Office of the Chief Counsel has determined that, because the IRS cannot determine the amount of the ESRP based solely on an Employer’s 1094-C and 1095-C information returns, the filing of those returns does not trigger the start of the standard 3 year statute of limitations under IRC §6501. The Field Notice reasons that no statute of limitations applies to §4980H because nothing in the language of the ACA or within the specific language in §4980H identifies any statute of limitations.
The absence of a statute of limitations means that employers can be on the hook indefinitely. The passing years will not give employers reprieve. This makes it even more important for employers to ensure compliance with the Employer Mandate for prior years and stay compliant with monthly compliance tracking for future compliance and tracking.
Just last week, we discussed the importance of a monthly ACA Compliance process, which ensures monthly offers are made as they become due to avoid ESRPs.
Employers, if you are interested in implementing a monthly ACA compliance process, contact us to learn about ACA CompleteSM.
