In December of 2024, the Employer Reporting Improvement Act was signed into law that gave rise to new processes that ease some of the ACA burdens for employers.
We want to call particular attention to the new guidelines concerning penalty assessments. No Applicable Large Employer (ALE) wants to receive the dreaded 226-J letter issued by the Internal Revenue Service (IRS) informing them of a proposed ACA employer mandate penalty. But, the good news is that employers will now have significantly more time to prepare a response before they need to consider requesting an extension. The Employer Reporting Improvement Act provides that affected employers will by default have 90 days to respond to the letter instead of the 30-day deadline the 226-J notices historically imposed. Notably, this extension does not apply to the proposed information return penalty notices that employers can receive when they submit late or inaccurate ACA filings.
The other major change within the act is the implementation of a statute of limitations for 226-J letters, whereby a penalty cannot be assessed more than six years after the due date of the return (or the date the return was actually filed, if this falls after the filing deadline). Prior to this new rule, there was no statute of limitation in place. This update applies to all reporting due after December 31st, 2024.
So, how much are the penalties for the 2024 filings, you ask? The 2024 4980H(a) penalty that applies for any month that an ALE didn’t offer minimum essential coverage (MEC) to at least 95% of their full-time employees and their children under age 26 is $247.50, multiplied by the ALE’s full-time employee count (minus a 30-employee grace count per month that’s split across a controlled group). The 2024 4980H(b) penalty, which applies when an ALE has fulfilled the ACA’s MEC requirement but has either: (1) not offered coverage to a specific full-time employee (and/or their dependents), (2) not offered affordable coverage, and/or (3) not offered minimum value coverage, is $371.67 per employee who enrolled in subsidized exchange coverage per month. As you can see, these are not insignificant amounts of money for many employers. There are also potential additional penalties at stake for late and/or incomplete filings. For 2024 ACA forms that are due to the IRS by March 31, 2025, the IRS could assess an employer $60 per return filed between 1-30 days late, $130 per return filed between 31 days late and August 1, 2025, and $330 per return filed after August 1st.
Of course, we hope many ALEs won’t need to take advantage of this welcome relief because they’re already prepared to e-File timely 2024 ACA filings with the IRS that demonstrate their compliance with the employer mandate. For those that are still looking for a solution for their 2024 or prior-year ACA filings, our team at engage@mzqconsulting.com would be happy to provide a quote. Please also reach out to our team at engage@mzqconsulting.com if you’d like information about our IRS penalty remediation service, where we help out employers that have received ACA employer mandate or IRS ACA information return penalty notices.
