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Regulation and Compliance > Federal Regulation > IRS

IRS Struggles to Enforce Employer Health Mandate

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Employers have had a hard time meeting the Affordable Care Act health coverage reporting requirements, and the Internal Revenue Service has had a hard time monitoring employer compliance.

Officials at the office of the Treasury Inspector General for Tax Administration, an agency that monitors the performance of the IRS, talk about IRS implementation of the ACA “employer shared responsibility” provisions, or employer mandate provisions, in a new report.

— (Related on ThinkAdvisor: 7 must-know new ACA tax administration facts)

The ACA added Section 4980(H) to the Internal Revenue Code. IRC Section 4980(H) requires many employers to provide affordable coverage with a minimum value to most full-time employees or face the possibility of having to pay a penalty. Affected employers have to report on offers of employee health coverage to the employees and to the IRS.

The reports show the IRS whether they might owe an employer mandate penalty. The reports also help the employees show whether they might qualify for ACA public exchange plan premium tax credit subsidies, or for other state or federal health coverage programs.

Employers with more than 100 employees, and some smaller employers, had to start filing coverage offer reports, on Form 1095-C, in 2016, for the 2015 tax year.

The IRS had processed 110 million 1095-C forms for 2015 by Oct. 28, TIGTA officials say in the new report.

The employers that submitted those forms had also filed 439,000 1094-C transmittal cover sheet forms along with bundles of 1095-C forms, according to TIGTA data. That means that each participating employer sent the IRS an average of about 250 1095-C forms.

The IRS organized extensive employer outreach and employee education programs to handle the new 1095-C and 1094-C filings, and it successfully developed a system for processing the incoming forms, TIGTA officials say.

TIGTA officials found, however, that the IRS has had problems with setting up some key compliance systems.

The IRS had hoped to have a system for checking 1095-C and 1094-C forms for accuracy and compliance issues ready by January 2017. When TIGTA completed work on the new report, in January 2017, the IRS had hoped the completion date for the system back to May 2017.

Partly because of funding constraints, the IRS was also behind on efforts to develop a system for identifying and notifying large employers that had not filed 1095-C or 1094-C forms. The IRS told TIGTA in January that it was testing a nonfiler notification system and hoped to have the system ready for use this spring.

Originally, the IRS was going to develop a case management system specifically for the ACA employer mandate program. Now, the IRS is trying to save money by adding an employer mandate section to a general IRS case management system, TIGTA officials say.

— Read ACA definitions: Enrollment period basics on ThinkAdvisor.


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