Pub. 7 2019 Issue 4

ISSUE 4. 2019 25 8. ARE MEMBERS OF A CON- TROLLED GROUP OF BUSI- NESSES HANDLED SEPA- RATELY FOR COMPLIANCE WITH THE ACA? Yes and no. If an employer is part of a controlled group, all entities in the group are combined as one for the ALE determination. However, each entity is responsible for their own forms and penalties. 9. ARE THERE PARTICULAR FORMS OR LETTERS THAT ARE BEING SENT OUT THAT INDICATE A PROBLEM WITH ACA COMPLIANCE? Yes. The main notices are: IRS Letter 226J: The IRS sends Letter 226J if even one employee at an ALE qualifies for a Premium Tax Credit (PTC) through the Exchange and the ALE offers inadequate or unaffordable insurance. IRS Letter 5699: The IRS sends Letter 5699 when the IRS thinks an employer is an ALE that has neglected to file the correct forms, 1094-C or 1095-C. IRS Notice 972CG: The IRS started using this Notice with the 2017 filing season. It sends a Notice 972CG when forms are filed late or incorrectly. The most common reason this Notice is sent out is if an employer did not file their Form 1094-C or 1095-C on time or did not file electronically if they were required to do so. Notice 972CG is issued under IRC section 6721 and applies a penalty of $260 for each information form that is filed late. The penalty can add up fast. If an employer were to file 150 forms late, that would amount to a $39,000 penal- ty. This penalty increases to $270 per form starting in 2019. 10. IS THERE ANYTHING NEW ON THE HORIZON THAT COULD HELP COMPANIES STAY COMPLIANT WITH THE ACA? Individual Coverage Health Reim- bursement Arrangement (ICHRA) is a new health reimbursement arrange- ment that can be used by employers of any size starting January 1, 2020. An ICHRA is funded solely by the employer and can be used by employ- ees for medical expenses, including individual insurance premiums. Of- fering an ICHRA will count as Min- imum Essential Coverage (MEC) and, if it is deemed affordable, it will satisfy the employer mandate for large employers. There are some drawbacks with the ICHRAs. Employers cannot offer an ICHRA and group insurance to the same class of employees. Addi- tionally, employees also must attest to being enrolled in insurance prior to receiving a disbursement from the ICHRA; employers must provide employees with a notice detailing the effect that ICHRAs have on the PTC; and ICHRAs need to be offered on the same terms to the same class of employees. Older employees and employees with additional depen- dents can receive additional money. Employers should seek professional advice before setting up an ICHRA. 11. IF A BUSINESS IS JUST GET- TING STARTED AND A LOT OF THE ACA COMPLIANCE REQUIREMENTS ARE BASED ON PRIOR YEAR INFORMA- TION, HOW DOES THE NEW BUSINESS BECOME OR STAY COMPLIANT WITH THE ACA? It is important to know and stay on top of the changing rules and regulations. Gaining clarity around the rules and knowing whether you are an ALE will be important for compliance. As stated earlier, the ALE determi- nation is based on a company’s prior calendar year hours. However, a new business, or a business acquisition, must be looked at in the current year to determine if they are an ALE. If a new business anticipates having 50 or more full-time equivalent employees in their first year of business, they will be considered an ALE and will need to offer affordable and adequate health insurance to avoid the ACA pay or play penalties. Additionally, if an entity acquires another entity, they will be deemed a large em- ployer if the resulting company, or controlled group, has 50 or more full- time equivalent employees. For example, let’s say Holding Compa- ny (HC) owns Bank (A) and decided to purchase Bank (B) in August of 2019. The HC has 2 FT employees, Bank (A) has 40 FT employees and Bank (B) has 20 FT employees. As of the date of ac- quisition, the combination of HC, Bank (A) and Bank (B), is an ALE, having 62 FT employees, and must offer afford- able and adequate insurance to all their 62 FT employees to avoid the ACA pay or play penalties. Before the acquisition takes place, the HC should make sure that appropriate health insurance is in place for the newly combined group. HOW CAN I MAKE SURE I’M IN COMPLIANCE? The Affordable Care Act affects every- one. Working with an ACA specialist can help you make sense of the com- plexities, so you can make confident decisions and avoid penalties. Contact Tonya Rule, CPA, Partner-in-Charge of Affordable Care Act Compliance and Consulting with questions or for addi- tional information. n Eide Bailly Partner Tonya Rule helps busi- nesses with the rules surrounding the Afford- able Care Act. She assists large employers with the compliance requirements, Forms 1094-C and 1095-C, and she also advises them on very technical rules that many employers and advisors aren’t aware of. In addition, she works with small businesses who are planning on expanding their current operations to make sure they are doing every- thing from measuring their employees cor- rectly to deciding on the best insurance plan for their business. Tonya regularly works with clients on various ACA IRS notices and has been very successful in getting most of these penalties abated.