Yikes! An ACA Notice – What Do I Do Now?
In the past few weeks, employers have started receiving notices from the federal and state-run health exchanges (now called "health insurance marketplaces") indicating that an employee has purchased coverage in the exchange and qualified for a subsidy (either a premium tax credit or a cost-sharing reduction). If you received such a notice, do you know what to do?
As we explained in our October 2015 brief, exchanges announced they would start to notify employers when their employees have purchased health coverage and received a premium tax credit or a cost-sharing reduction. These notices are important because, if you receive one, it puts you on notice that you may be liable for significant penalties under the Affordable Care Act's employer shared responsibility rules (Code Section 4980H).
An exchange generally mails a notice after an employee receives a subsidy for at least one month if the employee supplied the exchange with a complete employer address. Initial notices are mailed to the employer at the address provided by the employee. This means if you have multiple locations with employees (such as retail stores, restaurant locations, sales offices, or factories), it is likely each of your locations will receive notices.
Once you receive a notice, you have 90 days to appeal the determination using the Employer Appeal Request Form available here. A notice itself does not trigger penalties, but an appeal is an excellent opportunity for you to “head-off” penalties and to correct misinformation. Acceptable reasons for appeal may include (a) that you are not an applicable large employer that is subject to the ACA employer shared responsibility rules, (b) that the employee did not qualify as a “full-time” employee who was required to be offered coverage, (c) that the employee is not eligible for the credit since you did offer coverage to the employee that met the affordability and minimum value requirements, or (d) that the employee is actually enrolled in your employer-provided coverage (regardless of whether such coverage meets the affordability or minimum value requirements). The actual Employer Appeal Request Form is a throw-back to the last century, with lines to be completed by hand and submission of the form only by mail or fax. Confirmation of receipt of your appeal and any additional requests for information will come from the Marketplace Appeals Center (a different entity from the exchanges).
If you do not timely appeal, you will still have future appeal rights when the IRS contacts you to inform you of your potential liability for a penalty under Code Section 4980H and provides you an opportunity to respond. If not resolved in your favor at that time, the IRS will send you a subsequent notice and demand for payment.
It is important to remember that just because you have not received a notice from an exchange does not preclude you from receiving a future IRS notice or from becoming subject to Code Section 4980H penalties.
WHAT SHOULD YOU DO:
- Determine Deadline & Decide Whether to Appeal. You will need to decide whether to appeal. In some cases - such as where you did not offer any health coverage or you chose to offer a MEC plan to some of your employees, the notice may be correct. If you will appeal, make sure you calculate the 90-day deadline from the date of the notice (not from the date you finally received it).
- Establish Notice Procedures - Develop a procedure to handle any notices received in 2016.
- Primary ACA Contact – Designate an employee to handle notices and appeals. Make sure that if you have multiple locations, your staff knows to promptly forward any notices they receive to your primary ACA contact.
- Track Deadlines – Calendar response deadlines (if you have a litigation tracking system, you may be able to use it for this purpose).
- Form Language – Consider creating “form language” for your appeals in order to create consistency and avoid further requests from the Marketplace Appeals Center. You can obtain the Employer Appeal Request Form here. While you can submit your appeal in the form of a letter, we have generally found that use of the government-provided form is the preferred approach and tends to expedite processing. If you will use the Employer Appeal Request Form, you can complete Section 1 with the standard employer information and then make copies to be used to respond to each appeal. To further streamline the process, consider developing form responses for the most common appeals, such as a showing that the employee actually was offered affordable coverage or explaining that the employee did not qualify as full-time during the look-back period. Please contact your legal counsel to develop language that properly addresses the ACA requirements and provides enough supporting information to best ensure that your appeal is quickly approved.
- Retention – Retain all notices, appeals and supporting documentation so you will be prepared to respond to any future IRS notices. Be sure to keep this documentation separate from personnel files in order to avoid ACA retaliation claims.
- Build Your Defense - Keep clear records to prove that each full-time employee received a qualifying offer of coverage from you. While some experts recommend obtaining a signed declination from every full-time employee who does not enroll, this may be too much of an administrative burden for some employers. Alternatives could include company policies and procedures that are consistently applied (hoping to create a “presumption” that the employee received the offer) or communicating offers by e-mail and retaining IT records showing that e-mails were received. Any decisions as to an alternative method should be made after weighing the risks with the assistance of legal counsel.
- Educate Employees - Make sure your open enrollment materials clearly outline plan information and make clear that the health coverage you offer satisfies the ACA affordability and minimum value requirements (if this is true). (Using the same terminology that employees may see on the news or on the internet can go a long way to preventing issues down the road.)
- Streamline Notices - Consistently use the same name, address, and telephone number for your company’s primary ACA contact in all plan materials, as well as when filing your Form 1095-C. We hope that the exchanges will eventually streamline their processes and send all notices to a single address for each employer, so you want to make sure it's the address you want them to use.
A timely and successful appeal to a notice received from an exchange could help avoid any 4980H penalties in the future, and may help reduce the subsidy repayment obligation of your employees who incorrectly believe they are eligible for a subsidy. Remember you only have 90 days to file such an appeal.
Nelson Mullins Executive Compensation and Employee Benefits attorneys are ready to assist with your compensation and benefits related matters in a cost-effective and responsive manner. Please contact one of our Executive Compensation and Employee Benefits partners or the Nelson Mullins attorney with whom you work.
This Brief should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.
© 2016 Nelson Mullins Riley & Scarborough LLP. All Rights Reserved.
The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice based on particular situations.