The post below is a guest blog from Jay Lowe who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.
The Employer Mandate is perhaps one of the most nerve-wracking parts of the Affordable Care Act (ACA) for large employers: those employing more than 50 full-time equivalent employees, or FTEs. (What’s an FTE? Find out here!) Many large employers understand that they can be fined with a tax penalty if they don’t provide coverage that meets the minimum requirements or is deemed unaffordable for their employees. In the event that coverage does not meet these requirements and is not affordable, employees may be eligible for a premium subsidy when purchasing individual coverage through the government’s healthcare marketplace (the Exchange). This subsidy eligibility is what triggers the penalty back to the employer.
Section 1411 of the ACA establishes the procedures for determining an individual’s eligibility for subsidies from the Exchange. A Section 1411 Certification is the notice to an employer that an employee has enrolled in a qualified health plan through the Exchange and been provided a subsidy. If you are an Applicable Large Employer (more than 50 full-time equivalent employees) that receives one or more of these notices, this could mean that you are facing a penalty from the IRS as part of the Employer Mandate provision of the ACA.
Employers should be prepared to see these certifications and have a plan of action in place once they do. For more details on the Section 1411 Certification, see here.
Dealing, Appealing, and Other Important Things to Know About 1411 Certifications
First, remember that these certifications are not penalty notifications from the IRS. They are simply informational, letting you know that an employee has received a tax credit and named you as the employer as part of their application process. You can expect a formal penalty notice from the IRS to follow; however, the notice will give you the ability to appeal if your health plan does meet all of the Employer Mandate requirements. By appealing, you can potentially stop the penalty process from the IRS.
It is important to educate the employees who will be handling these notices within your organization. This is a new form and something that most will not be familiar with. They need to know what to look out for and be prepared for what to do. If your health plan does meet minimum essential ACA requirements, make sure the employees in question understand that they will need to act quickly to appeal these notices; you will only have 90 days from the date of the notice to file your appeal.
In the event that your plan is not meeting all of the requirements of the Employer Mandate, look out! You’ll probably have to pay a fine. The Section 1411 Certification will alert you to your penalty liability. Only employees who receive a subsidy in the Exchange can trigger a penalty for you, and these notices will tell you exactly who those people are. As a best practice, employers should keep track of what their total exposure could be prior to receiving the notices. Their final liability could be less than what they are expecting.
With the delay of the Employer Mandate reporting requirements, it is likely that employers will not begin to see Section 1411 Certifications until late 3rd quarter or 4th quarter of 2016. That gives you plenty of time to educate your people, prepare an action plan, and learn all about 1411 Certifications!