Some employer groups are urging the Trump administration to suspend enforcement of the Affordable Care Act’s (ACA) employer shared-responsibility (ESR) rules and focus on working with Congress to repeal the requirements. In a May 30 letter, more than 20 groups including the ERISA Industry Committee take strong issue with what they characterize as the “unlawful and deeply flawed process” the IRS is using to notify employers about potential liability under the ESR rules.
Under the law, large employers must annually report to the IRS information about the health care coverage, if any, they offer to full-time employees and dependents. Employers that don't offer coverage meeting the law's requirements may owe tax penalties. Although the IRS received the first information returns in 2016, the agency didn't start sending out “226J” letters notifying employers about potential 2015 penalties until late last year.
In their letter, the groups say that many employers didn't get the required notices from federal or state-run health care exchanges about employees who could have triggered employer penalties by enrolling in exchange plans with the help of federal tax credits. The regulations require that employers get timely notification from the exchanges so they have an opportunity to appeal the tax credit eligibility determination.
Acting IRS Commissioner David Kautter told a House committee last month that the agency had sent about 10,000 penalty assessment letters and that more than 80 percent have been resolved with the employer owning nothing. Employer reporting errors have been to blame for many of the letters. But the “ongoing cost, complexity, and confusion surrounding compliance” with the ESR rules – as well as the “denial of employers’ due process rights” -- warrants suspension of those efforts “until the [employer] mandate can be fully repealed,” the groups wrote.
How regulators respond remains to be seen. Repeal of the employer mandate has been a key feature of Republican ACA repeal-and-replace bills and will continue to be a key plank in their health policy agenda, although prospects for action this year appear dim.
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