The Internal Revenue Service (IRS) has started issuing the first wave of Letters 226-J informing applicable large employers who did not comply with the ACA employer mandate for 2015 Plan Year that they may be liable for an Employer Shared Responsibility Payment (ESRP). Though receiving the letter is unnerving, there are certain steps you should take to resolve the matter as quickly as possible.
- Carefully Review the Letter 226-J. The Letter will present your proposed ESRP assessment as well as your rights, including your rights to provide additional information should you disagree.
- How long do you have to respond to the letter?
You only have 30 days to respond to an IRS letter 226-J. The response date is printed on the top of the Letter 226-J. Depending on whether or not you agree with the assessment of your liability, you may need more than 30 days to review all of your data. If you need an extension, reach out to the individual IRS contact listed on the letter and ask for the extension early in the process.
- Determine your response.
Responding to letter 226-J should not be handled by your benefits departments alone; your chief counsel, CFO, and any internal ACA experts should be part of the conversation. Depending on your organization, it may be a good idea to seek legal counsel or other external experts.
- Assess your liability. While the current letters 226-J refer to employer shared responsibility payments for the 2015 plan year, the penalty process is not limited to that year or to shared responsibility payments specifically. Work with your team to ensure you understand the full scope of any shared responsibility payments and other penalties you may owe for 2016 and 2017 as well.
- Provide all of the requested information – Letter 226-J requests that you return Form 14764, ESRP Response and Form 14765, Employee Premium Tax Credit (PTC) Listing to the IRS. Do not forget to return these forms.
- Review your forms 1094-C and 1095-C. If you disagree with the IRS’ assessment, it’s important to ensure your forms 1094-C and 1095-C are correct. If you need to correct your data on those forms, do not submit a corrected 1094-C to the IRS; you will be able to make changes in your response to the letter.
- Respond to the letter. Fax and mail any response to the IRS. Keep a copy of the fax confirmation sheet. Also consider following up with the IRS to confirm receipt.
It is important to note that Letter 226-J is not a bill. Its purpose is to notify employers that one of your employees received a premium tax credit and that you may be liable.
If you have questions regarding the letter, contact us at firstname.lastname@example.org or 1-800-250-2741 ext. 170.