Unique ID: 76b99178-0f9d-4558-8e6f-25fdc74d2dfb

Beginning in early July, 2016, Health and Human Services (HHS) began sending out notifications to employers indicating that they had employees who had been determined to be eligible for an Advanced Payment of the Premium Tax Credit (APTC) or for cost-sharing reductions (CSRs) for at least one month in 2016. Put another way, the employee was eligible for a subsidy from the Health Insurance Marketplace.

This, of course, is the trigger to potential employer penalties under the employer Shared Responsibility mandates, so employers need to evaluate each of these notices to determine whether they should attempt to appeal the determinations. It's important to note that these notices aren't an indication that the employer is going to get penalized. Rather, it's simply a notification that an employee was eligible for a subsidy for at least one calendar month in 2016. There are many reasons why an employee might be eligible for a subsidy:

  • Employee was part-time
  • Employee was full-time, but in their waiting period
  • Employee was full-time and offered minimum value, affordable coverage, but qualified for a subsidy anyhow due to household income
  • Variable-hour employee was working full-time hours, but was in their initial measurement period

These reasons are perfectly valid and would allow the employee to have a subsidy without the employer being assessed a penalty under the employer mandate. There's one more reason for a subsidy, however, that employers need to make sure is addressed: the employee was full-time, but not offered minimum value, affordable coverage.

In this circumstance, the employer is likely going to be subject to at least the Part B penalty on that employee. If enough employees falling into this category qualify for a subsidy, the employer could be assessed with the Part A penalty, which is substantially more costly.

Employers who feel that an employee was erroneously issued a subsidy can appeal that decision by following the steps outlined at https://www.healthcare.gov/marketplace-appeals/employer-appeals/.

It's important to note that the HHS notice doesn't specify which month(s) the employee was eligible for a subsidy, so it's still important for employers to make sure they’re properly tracking employee full-time status on a monthly basis.

Finally, if the IRS determines that the employer owes a Part A or Part B penalty, a notification will come separately from the IRS at a later date. Most marketplace notifications so far have been for 2016, and therefore penalties from these events won’t be assessed until sometime in 2017. What's yet to be seen are notifications about subsidies issued in 2015 that would result in penalties being assessed in 2016. We'll keep Assurance clients updated on developments as they unfold.

Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.