TAKE NOTICE: IRS Getting Ready to Send “Pay or Play” Penalty Letters to ALEs

The Affordable Care Act (ACA) passed in 2010 included an Employer Shared Responsibility Payments (ESRP) provision mandating that Applicable Large Employers (ALEs) must provide affordable, minimum value, minimum essential health coverage to at least 95% of its full-time employees (and their dependents) or face potential “pay or play” penalties. ALEs are considered employers that employ 50 or more full-time equivalent (FTE) employees beginning in the calendar year 2015.

Recently, the IRS updated its frequently asked questions (FAQs) on the ACA’s “pay or play” mandate. Based on the updated FAQ, the IRS appears to be ready to begin sending out penalty letters to those ALEs that it believes will owe a penalty for failing to comply with the mandate. Employers that receive a Letter 226J are assumed to have had at least one full-time employee who was enrolled in subsidized coverage through the Marketplace. Employers receiving Letter 226J will have an opportunity to contest the validity of the penalty within 30 days of the date of the letter.

Please click the link to our Legal Alert for a more detailed description of the Employer Shared Responsibility Payments provision and next steps to follow if you are to receive a 226J penalty letter. You can also contact your CPI-HR Benefits Consultant for assistance.

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