Congress has just doubled the penalties for failure to comply with employer reporting requirements under the health reform law. These changes immediately heighten the business case for a technology investment by employers facing this looming reporting requirement.  

Starting next year, health care reform requires applicable large employers (those with more than 50 full-time / full-time equivalent employees; also called ALEs) to report to employees and the IRS whether they offer their full-time employees (and dependents) the opportunity to enroll in coverage under an employer-sponsored plan. These reports are submitted using the series 1094 and 1095 forms.  

Doubling Penalties

Failure to comply with these reporting rules subjects an employer to two separate possible penalties. The separate penalty amounts will apply based on: (1) failure to provide the forms within the applicable deadlines, and (2) may apply again based on inaccurate filings. Notably, some relief is available for corrections that are submitted within specified timeframes.  

  • Originally, each of the two penalties was $100 per statement.  Now, the legislative change has increased the penalty to $250 per form (from $100). So employers once faced potentially $200 in penalties now face potentially $500 in penalties.
  • Originally the penalties were “capped” at $1.5M but the per statement increases effectively doubles the previous limit cap.  So, employers who once faced maximums for both penalties at $3M now are exposed to penalties up to $6M total.  

First year “good faith” relief

Although ACA reporting penalties are going up, the original IRS promise -- that taxpayers who demonstrate timely, good faith compliance will not be penalized -- should still hold. The IRS has promised good faith compliance relief on accuracy for the first filings (due in the first quarter of 2016), provided the filing deadlines are met. Good faith compliance around accuracy should therefore remain available as promised since Congress simply increased the dollar amounts in the law without specifically mentioning health reform (which is just one of the types of information returns affected by these generally applicable penalties).

Helpful Links

See Section 806

Q31 at the FAQ refers to health reform filing penalties under IRC Sections 6721 & 6722

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The discussion presented in this document is informational in nature and is not (and should not be construed as) a legal opinion or legal advice. We would be happy to discuss any information above with you or your attorney.