Business Situation
Our client, a mid-sized facilities management company, received a notice from the Internal Revenue Service (IRS) indicating a discrepancy in their Affordable Care Act (ACA) filings. The notice warned our client was responsible for an estimated Employer Shared Responsibility Payment (ERSP) of over $500,000 – claiming that the company had not provided the minimum essential health insurance coverage (MEC) to their employees as is required by the ACA.
Concerned about the notice, the size of the penalty, and the validity of the charge, the company engaged the ACA experts at Clark Schaefer Strategic HR to investigate and resolve the issue.
Our Approach and ACA Penalty Resolution
Our ACA experts took a swift and thorough approach conducting a comprehensive review of the ACA reporting documents and filings, in addition to the employee wage records, benefit plan documents, and enrollment records. We identified these key areas of focus:
Form 1094-C Reporting/Transmission Errors
Through our analysis, we discovered that a required field on the IRS Form 1094-C was blank resulting in the false assumption by the IRS that the company did not provide coverage during the stated time frame.
After having discussions with IRS representatives validating our approach, we submitted a revised 1094-C on behalf of the company, correcting the discrepancies with the initial filing.
Premium Tax Credit Penalty Errors
Our meticulous review revealed penalties assessed for a few employees certified as having received a Premium Tax Credit were made in error as the employees were offered affordable coverage under the Federal Poverty Line Safe Harbor method, but they voluntarily waived the coverage.
We found applicable forms and plan information providing proof that affordable coverage was offered and waived by these employees. In addition, we completed the affordability calculation to demonstrate acceptable coverage under the IRS rules.
Our ACA experts submitted a detailed response letter to the IRS addressing the notice, including an explanation of the errors, supporting documentation, and a request for abatement of the penalties based on reasonable cause and good faith compliance.
Clark Schaefer Strategic HR discussed these errors with IRS agents and successfully demonstrated that the penalty assessment was invalid and did not indicate noncompliance.
Client Benefit
Clark Schaefer Strategic HR was able to promptly investigate the proposed penalties, identify the errors, make the necessary corrections, and communicate our findings and solutions with IRS agents leading to a successful ACA penalty resolution.
The IRS accepted the amended filings and agreed to waive all penalties. As a result, our client was not required to pay any fines associated with the IRS notice.
With experts in ACA and benefit management, WE SAVED OUR CLIENT OVER $500,000 in inaccurate ACA penalties!
