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Home ACA Audit The ACA Exchange Appeals Process

The ACA Exchange Appeals Process

4 minute read
by Robert Sheen
The ACA Exchange Appeals Process

The Exchanges in the Health Insurance Marketplace have been issuing out notices to employers.

Each such Notice indicates to the employer that it may be subject to penalties for failing to offer the applicable healthcare coverage to identified employees as required under the employer shared responsibility regulations pursuant to Internal Revenue Section 4980H (the “Employer Mandate”).

The Notice provides a preliminary finding that the identified employee(s) reported that he/she did not

  • (a) receive an offer of healthcare coverage
  • (b) was offered coverage but such coverage was not affordable or did not provide for minimum value
  • (c) was in a waiting period and unable to enroll in healthcare coverage.
    Moreover, the Notice explains that the Exchange found that the identified employee(s) was (were) eligible for a tax subsidy as either an advanced premium tax credit (APTC) or cost sharing reduction (CSR).

The Notice further explains that if the employer was an Applicable Large Employer (ALE), which is an employer with at least 50 full time or full time equivalent employees, the employer may be subject to penalties under the Employer Mandate.

Such penalties are triggered if the ALE failed to offer coverage to 95% of its full time employees or offered such coverage but such coverage was not affordable or did not meet minimum value. Importantly, “full-time” is defined to be 30 hours of service per week.

If the employer fails to appeal within 90 days of the date of the Notice, the Exchange will send a notice to the IRS, which may result in the imposition of penalties on the employer.

To appeal an Exchange Notice, the employer will need to provide documentation showing that the identified employee did in fact receive an offer of coverage for the applicable time period, that such employee’s offer of coverage was affordable and did meet minimum value, and/or that the employee was not in a waiting period and unable to enroll in such coverage.

The Exchange does not make the determination that penalties should be imposed on the employer. That will be the task of the IRS. However, by timely appealing an erroneous Notice from the Exchange, a subsequent notice from the IRS may be avoided.

At the later IRS notice stage, the defense may involve additional issues to the extent that the employer seeks to assert facts that are not the default facts. For example, if the employer contends that the identified employee was not a full time employee, the employer will need to show documentation of how that person’s non-full time status was determined and that such methodology was one of the IRS approved methods.

If the employer contends that it was not an ALE, in general, the employer will need to show documentation of the fact that it did not have the requisite 50 full time and full time equivalent employees in the year prior to the reporting year. It is important to keep in mind that the IRS has access to the employer’s W-2 counts, which may, at least superficially, contradict the employer’s assertions.

This link shows how to complete an Employer Appeal Request Form or a letter with the equivalent information as the form. Such appeals must be filed within 90 days of the notice.

A helpful tip: while many employers have software to assist in generating forms for information reporting, this is not one of them and should be handled by a professional with ACA expertise.

Further, under the ACA (ACA Section 1558, added to Section 18C to the Fair Labor Standards Act) there is an explicit anti-retaliation clause, whereby employers may not discriminate against those employees who have received such a tax subsidy. Regardless of whether your notice is correct or your appeal is denied, you must not retaliate against your employee. The cost could be much more than that proposed shared responsibility payment.

Here are resources to protect your business from an ACA audit.

ACA 101 Toolkit
ACA Spot-Audit for Finance and HR

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About the Author:

Joanna Kim-Brunetti, formerly a partner with Akin Gump Strauss Hauer & Feld LLP, is the VP of Regulatory Affairs and General Counsel of Trusaic. Kim-Brunetti has 20 years of experience advising clients on a wide range of employment, tax, intellectual property, an regulatory issues.

Joanna spearheads the Regulatory Affairs practice at Trusaic, focusing on employer compliance issues.

Professional Affiliations and Credentials:

  • American Bar Association – Author:
    • Guide to Protecting and Litigating Trade Secrets (ABA 2012)
    • Ethical Considerations in Reissues and Reexaminations (Practicing Law Institute [PLI], 2011)
  • Former President and Board Member, Korean American Bar Association
  • Rising Star, Super Lawyers
  • Subcommittee Chair, American Bar Association
  • Committee Member, Federal Courts Coordinating Committee of Los Angeles County Bar Association
  • American Bar Association – Author:
    • Guide to Protecting and Litigating Trade Secrets (ABA 2012)
    • Ethical Considerations in Reissues and Reexaminations (Practicing Law Institute [PLI], 2011)
  • Symposium on Ethics Issues Arising in the Context of Electronic Discovery and Document Destruction Policies (2005) Education
  • B.S. Chemical Engineering, University of California Berkeley
  • J.D., Loyola Law School, Los Angeles
Summary
The ACA Exchange Appeals Process
Article Name
The ACA Exchange Appeals Process
Description
The Health Insurance Marketplace has been issuing out notices to employers signaling a basis to impose penalties for failing to offer the applicable healthcare coverage to identified employees as required under the Employer Mandate. Employers who receive such notices have 90 days to respond. What should employers do if they receive such a notice?
Author
Publisher Name
The ACA Times
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