Good afternoon, everyone, and welcome to today’s webinar, ACA Fundamentals Every Employer Should Revisit. And this is also a kickoff to our Back to the Basics series. We’ll have part one, two and three all summer delving into more Back to the Basics topics. My name is Robin Carlini. I’ll be your moderator today. And as we head into the Memorial Day weekend, we appreciate you spending part of your afternoon with us before kicking off the long holiday weekend. And we hope everyone has a safe and meaningful Memorial Day as well. And I’ll be introducing our speakers soon, but you’re especially lucky today because we have not one but two ACA experts joining us today. And before we begin, please note that Solaris does not provide legal advice. We actually have a lawyer as one of the speakers today. However, to answer specific legalese ACA questions, you should still seek your counsel. And a little bit of housekeeping. This webinar is being recorded. The recording will be sent to everyone tomorrow. And please feel free to type into chat or the Q and A box and we will answer as we go through and towards the end. And also upon exiting the webinar, there’s a quick survey, if you don’t mind filling that out. And before we dive in, I’d like to take a moment to talk about Solarix. At Solarix, ACA compliance isn’t just one of the things we do, It’s part of our foundation. The company started when the ACA law started. Since the inception of the ACA, we’ve been filing for thousands and hundreds of thousands clients. Today, one in four companies in the United States relies on Solaris for ACA administration and reporting. And we love to say that ninety seven percent of our customers are still with us. And also, I’d like to point out our employees as well. When you’re a Solarix customer, you do get a designated account rep that has been here since the inception as well. And I’m going to go ahead and start a poll. This one is just asking who is here for the SHRM credit. So if you go ahead and answer yes, I’ll know who to email the certificates to. So basically this is the interactive portion where we confirm everyone’s alive and connected to LAPA. Yes, absolutely. Okay, and if you didn’t have time to answer yes and you still want one, please just reach out. I’ll always send it. Thank you for answering. And now we’re excited to welcome Ashley Pope, Director of ACA Services at Celerix and Stacy Barrow, Partner at Meredith Sparrow Inlet. Ashley, would you like to introduce yourself? Good afternoon everyone. Thank you for joining us. My name is Ashley Pope. I am the director of ACA services here at Salerix. I have been in the ACA space since twenty fifteen, which I guess means I might be a little bit crazy, but happy to be here today and present some information everybody needs to know. I’m Stacy Barrow. I’m a partner at my firm BarrowLint out of Boston. I’ve been practicing for about twenty years in the ERISA employee benefit space. I specialize in health and welfare benefits and all things ACA reporting. I’ve probably helped hundreds of employers across the country respond to various IRS letters. Happy to be here. Yes. Thank you guys and now I’ll kick it off to Ashley. All right, so highlights from twenty twenty five ACA reporting. I would love to say these are rare ACA mistakes, but this is basically the IRS’s greatest hits album. Inaccurate eligibility tracking. One of the biggest mistakes employers make is misclassifying employees because their schedules fluctuate. At the end of the day ACA doesn’t care what someone was supposed to work, it cares what they actually worked. So when you hear managers say things like oh she’s basically part time ish the IRS says love that for her now show me the hours. So then we see a good bit of late filings nothing unites the organization faster than waiting to the last minute and coming up on a deadline. Don’t want to have that happen. That’s how you get lots of errors, high volumes of corrections needed. Get lovely penalty letters later because you filed late. Data inconsistencies across systems. This is where payroll says one thing, benefits says another. HR says the third thing and everyone steers nervously at each other. This is a huge test we know of organizations. You’re having to pull information from multiple different sources, but those data inconsistencies can definitely cause problems from a reporting standpoint. And then failures of affordability. Not making sure that your coverage is affordable ahead of time. You may not realize it too late until you do the math and that can be a problem and that causes reporting issues as well. Okay, now we’re going to go into ACA terms, but we’re going to kick it off with a poll question. Let me go ahead and launch that. Okay, here we go. What is your current status with ACA reporting? Are you a Solarix customer? Are you currently evaluating ACA vendors? Are you within another vendor? Or are you handling ACA internally, and you’re just here to stay informed? Just gives us a baseline of who’s on the call. Okay guys, it looks like twenty three percent are our customers. Thank you for being our customers. Glad to see you here. Nine percent with another vendor, which is perfectly fine. Sixteen percent handle it internally. So, I think we know why y’all are here, maybe. And fifty two percent are just here to stay informed. No wrong answers there. No wrong answers. We’re all we’re glad y’all are all here. Yeah. So a quick refresher of what employers are responsible for, you know, the easily the most heavily enforced aspect of employee benefits compliance is this AC reporting and the offering of coverage to full time employees. So employers have to determine their status of whether they’re an applicable large employer. I will talk about that in more detail in a minute. You need to track employee eligibility, meaning you need to be able to identify which of your employees are full time and then offer your full time employees affordable minimum value coverage or potentially be exposed to penalties. And then of course, once you’ve done all that, the way you verify compliance to the IRS is to file those ten ninety four C and ten ninety five C forms. You need to do it accurately and timely. Alright so let’s talk about this wonderful Affordable Care Act timeline. So twenty ten is when the Affordable Care Act officially became law. HR departments everywhere collectively said, what? Wait, we have to track what? Why? Then back in twenty twenty three, while many employees were still trying to figure out basic ACA terminology, Solarix was already building compliance solutions around it. Twenty fifteen is where employers learned ACA reporting wasn’t just about offering coverage, it was about proving it with data. March twenty sixteen was the first real ACA reporting deadline, also known as the moment everyone discovered how complicated line fourteen codes were. Before twenty seventeen ACA felt a little theoretical because there was something that was missing. Then the IRS started mailing out those receipts otherwise known as penalty letters and suddenly ACA got very real financially for a lot of applicable large employers. Because federal reporting apparently wasn’t enough, twenty nineteen states decided to jump into the party. Up until twenty twenty, employers got a little grace for honest mistakes with the good faith relief effort. Then the IRS basically told everybody, okay, training wheels are off, now you got to do it right. In twenty twenty four, the e file threshold reduced from two fifty forms to anything more than ten. This is one of those changes that sounded small but impacted a lot of employers that previously did not have to use electronic means for filing. Twenty fifteen brought around the first ACA updates that employers actually liked in the form of the Paperwork Reduction Act. Employee forms could be made available upon request provided you follow the rules of the act. And here we are in twenty sixteen where ACA compliance is no longer optional chaos. It’s operational strategy. The biggest takeaway from this timeline is that ACA compliance has continuously evolved and every year the expectations become more data driven, more automated, and more enforceable. The employers who succeed are the ones who are treating ACA as an ongoing operational process and not a once a year filing. Perfect. I think you said twenty sixteen and you meant twenty twenty six. I did, I’m sorry, twenty twenty. I just want to be younger. Let’s not go back. So how do you determine if you’re an applicable large employer? You have to calculate your full time employees and your full time equivalent employees. And if the total is fifty or more on average in the prior calendar year, then you’re going to be an applicable large employer in the current year. So it’s always done on a look back basis, so it really shouldn’t be a surprise when you’re an applicable large employer. But you start out by counting your full time employees, that’s pretty straightforward, but then you take all of your part time employees and you add up their hours for each employee up to one hundred and twenty, and then divide that number by one hundred and twenty, and that gets your full time equivalent headcount. So this group here has sixty employees, thirty of them are full time, thirty are part time, and we make it easy here to each work sixty hours a week. And so from a full time equivalent perspective, those thirty part time employees are fifteen full time equivalents. This employer therefore has a total of forty five full time equivalents, and they are teetering on the ALE threshold. That ACA math can be surprising. So ACA, they do use several defined terms in terms of employee classifications, and one of them is a full time employee. And this generally refers to a thirty hour per week standard or one hundred and thirty hours of service per month. So if the employee is paid or entitled to pay for thirty hours a week or one hundred and thirty hours per month, then that employee is a full time employee. They should generally be offered coverage within ninety days. Technically you have until the end of the third full calendar month of employment, but due to other employee benefits laws, typically this is within ninety days or by the first of the month following sixty days of employment, but full time employees are easy. Then you have seasonal employees who may work full time for a relatively brief period, typically where their customary annual employment doesn’t exceed six months. They’re considered seasonal and those employees would be placed into your measurement period. And typically when you use a twelve month measurement period, your seasonal employees will not end up being full time. And then we have our variable hour employees. These are folks whose schedule may have them working above or below thirty hours per week on a regular basis, and so it’s kind of unclear at the outset whether they are going to be full time or not. And so we usually will measure them under an initial measurement period. You can kind of look at this on a monthly basis rather than measuring employees, but most employers that have these variable hour employees will choose to measure them so they’ll have some degree of stability and they’ll understand when they have to offer coverage. Other rules under the ACA have to do with breaks in service. Generally, if you have an employee who is terminated and rehired within thirteen weeks, you cannot require them to sit a new waiting period. If they had coverage prior to their break, they need to be reinstated in that coverage return or by the first of the month following their return to work. If they come back with a greater than thirteen week break in service, they can be made to set a new waiting period. This thirteen week period is increased for educational organizations. So if you’re a school, then employees who return within twenty six weeks are considered ongoing and cannot be made to satisfy any waiting period. Controlled groups. So the ACA is really one of the first times where it became super important to understand whether you were part of a controlled group of corporations. And this is generally when you have companies that are connected through a chain of common ownership where company A owns at least eighty percent of company B, company B owns eighty percent of company C, and so on. When you have these controlled corporations, all of your employees are aggregated to determine if you’re a large employer. And so if you’re comprised of multiple EINs and they’re under fifty on each EIN, but in total you’re over fifty, then each of those EINs, employer ID numbers, will still need to file their ACA forms. There are several types of controlled groups. There are parents subsidiary controlled groups, brother sister controlled groups, there’s affiliated service groups. These are among the more complex rules in the Internal Revenue Code. They’re often misunderstood. We always recommend if you have any questions about control group status, consult with qualified ERISA counsel. We’re happy to help with these, evaluations. So there’s a couple of ways to tackle the idea that you need to offer coverage to full time employees and identifying your full time employees. The regulations identify two ways of doing things, and these are basically the exclusive ways of determining full time status. You can use the monthly method or you can use the looked at method. The monthly method involves just evaluating employees’ hours each month and reviewing them to determine if they work one hundred and thirty hours, and if they do, then you report them as full time. There’s a lot of administrative burden to this. You’re taking a look at hours on a monthly basis and maybe removing folks from the plan, COBRA. Alternatively, the IRS allows you to measure employees for a defined period of time and to determine their full time or part time status, and then you lock in that full time or part time status into what’s called the stability period. So usually, your stability period will actually match your plan year. So if you let employees make elections on a January first cycle, then your stability period is going to be January first through December thirty first. Your measurement period will be usually twelve months prior to the stability period. We have a little buffer in there, the administrative period of sixty to sixty one days, meaning basically two months. So if your stability period is the calendar year, your administrative period will be November first of each year through December thirty first of each year, and your measurement period will run November first of each year through October thirty first of each year. Then you have that two month administrative period and everything repeats each year. Your admin period overlaps with your stability period and so there’s no gaps in coverage. They see it there full time. Yep. Is there I’m I’m gonna ask this question because we get it asked a lot. Is there ever a time where an employer can use both measurement options? Yes. Generally, when you use the look back period, you need to use it consistently for all employees in a class, but the regulations allow you to use the monthly method for some groups and then the look back for others is very strict. It’s basically if you’re going to use the look back method for any hourly employees, you have to use it for all hourly employees under that EIN. And then for the salaried folks, you can use the monthly method. A lot of companies do for the salaried folks. They’re usually just full time, but you can’t really divvy it up more than that. There’s other permutations involving, union employees, but, you know, with respect to nonunion employees, it’s basically hourly and salary. Thank you. That’s great. So can you change your measurement and stability periods? You can change them from time to time, although you can’t disadvantage any employees who might be locked in a stability period as full time. So changing your plan year doesn’t automatically change your measurement and stability periods. You may need to update your plan documents or other policies where you disclose your measurement period. You can change it, you know, if you want to maybe you’re going to have a short plan year, but if you have it, if you again, if you have someone say in a twelve month stability period, you can’t cut it short because all of a sudden you want to change to a six month. You’d have to let that person ride out their existing stability periods full time before you remove them from coverage. Okay, we’re going to launch our next poll. Here we go. If you can improve one area of ACA compliance, what would it be? I know most people would want to improve more than one areas, but just pick one eligibility tracking affordability calculations reporting accuracy reducing risk and penalties and confidence in our process. Is where we would normally cue the Jeopardy thing while we wait. Yes. Okay, we have a smorgasbord of answers here. Nineteen percent eligibility tracking, eleven percent affordability calculations, twenty six percent reporting accuracy. I’m surprised that only eleven percent reducing risk and penalties, and thirty three percent confidence in our process. What do you guys think of that? Any surprises? No surprises here. Reducing penicillipsis is historically a very popular answer. I know. I was surprised about that. Yeah. Okay. Here we go. So you have determined you’re a large employer, you’re offering coverage to full time employees, but does it meet the affordability guidelines? We know that coverage is affordable for ACA purposes if the least expensive minimum value plan available to the employee, if the cost for that coverage, employee only coverage, all these different factors, right? Single coverage doesn’t exceed nine point nine six percent of the employee’s household income or one of the available safe harbors such as W-two wages or the rate of pay or the federal poverty level, which we have here for twenty twenty six. So if you can, you know, afford to kind of economically, from a company perspective, offer at least one plan that doesn’t cost more than one hundred and twenty nine dollars a month, you will have a de facto affordable offer of coverage. It eases your reporting obligation a little bit. You can use some abbreviated reporting, but as long as you have one option that doesn’t cost more than that amount, then you have an automatically affordable plan. Of course, you can charge more than that as long as employee wages can support it. But these penalties for failure to offer affordable coverage, they go up significantly each year. As you can see for twenty twenty seven, those figures were just released. We’ll talk about how to calculate these penalties in a moment, but they’ve gone up thirteen percent. There’s an annual penalty of up to five thousand six hundred and seventy dollars for each full time employee who’s not offered affordable coverage. And these penalties are excise tax penalties, so they’re not deductible business expenses for the company. So, Stacey, this is almost like when you go to the airport and your baggage ends up to be fifty one pounds, they’re gonna charge you like one twenty nine ninety is not gonna cut it. Yeah. Well, he’s funny. I mean, we rounded down to eighty nine cents. You might be able to get away with one twenty nine ninety with rounding, but why tempt fate over the But yeah, yeah, otherwise it’s it’s it’s pretty severe, right? If you don’t offer affordable coverage, it doesn’t matter how unaffordable it was. If it’s unaffordable, you can’t put a safe harbor in, then you have the penalty exposure. So there are three affordability safe harbors that the IRS has identified. There’s the federal poverty level, which we just talked about, and that one’s the easiest one to calculate. It’s gonna be, you know, the same for everyone, a hundred and twenty nine dollars, and it’s based on a hundred and a hundred percent of the federal poverty level. The rate of pay is another safe harbor. It’s based on the employee’s hourly rate of pay. So if the cost of coverage doesn’t exceed the employee’s rate of pay multiplied by one hundred and thirty hours times the affordability percentage for that year, nine point nine six, then coverage is affordable. And the good thing about this safe harbor is you can always assume that employees work one hundred and thirty hours per month. So if you set your contribution to be affordable based on one hundred and thirty hours, then even if you have some variable hour employees who might work less than one hundred and thirty hours during their stability period, they still receive an affordable offer of coverage. So I kind of like the rate of pay safe harbor in that it doesn’t really get affected by how many hours the employee might work that year. The W-two safe harbor is probably probably gives the most bang for the buck. It gives the employer the most leeway to charge a greater contribution, but it’s based on the employee’s box one W-two wages for that year. So, you know, for twenty twenty six, if you’re trying to, you know, hug the line and make sure you’re only offering coverage that costs nine point nine six percent of wages, you won’t even know for sure if you’ve met that requirement till the end of the year when you have the full the final box one w two wages for the year. So if you if you think all your full time employees are gonna work eighteen hundred hours a year and they work less, then they might still be full time and you know, you may not have an affordable offer of coverage. The W-two safe harbor requires a lot of monitoring during the year. So Stacy, for W-two, if I’m not employed the entirety of the year, how is that handled? They have a formula for prorating partial year offers of coverage, where if your if your offer of coverage doesn’t match the months that you were employed, they prorate your annual salary. They reduce it so that you can have, you know, the cost of coverage up against the the pay you received during the months you actually were offered the coverage. And it’s a little not counterintuitive, like employers might if they were prorating it themselves, they might not use the IRS method. You know, the IRS says if you were an employee one day of the month, you have to include that in the denominator, and if you’re offered coverage for one day of the month, you include it in the numerator. So it’s a tricky calculation to prorate those wages. It’s another reason, you know, why the rate of pay is easier. So one of the other ACA requirements is, you know, you have to offer coverage that is minimum essential coverage to get out of the one penalty regime, And then to get out of the other penalty regime, it has to be affordable and minimum value. So the MEC plan is just the basic, you know, preventive care only plan. It’s just to kind of break the ice, and it avoids this first of the two ACA penalties, the requirement to offer coverage to at least ninety five percent of full time employees. That doesn’t have to be affordable, doesn’t have to be minimum value, just has to cover preventive care and you can avoid the a penalty. To avoid the secondary penalty, the failure to offer affordable coverage, the plan has to be a major medical plan. Has to provide at least sixty percent minimum value, meaning the plan is designed to pay on average at least sixty percent of participants’ medical expenses. Most major medical plans are minimum value, Almost impossible to find a major medical plan that’s not minimum value. So basically, a MEC only plan will get me my measles shot, but if I get hit by a car and break my leg, it’s not going to help me very much. I need minimum value as well, right? Yeah, exactly. That’s a great analogy. And then we also have this other mechanism, the ICRAR, the individual Coverage Health Reimbursement Arrangement. And this allows employers to pay for employees’ individual market health insurance instead of offering a group health plan. And ICRARs also can be qualifying coverage for ACA purposes, meaning if you’re an applicable large employer, you can offer an ICHRA and still meet your requirement to offer affordable minimum value coverage. There are different rules and regulations for ICHRAs. You kinda have to be consistent with your contributions. There are only certain permitted classifications, but it’s you know, it does it does qualify as an ACA eligible plan, you know, for employers. On this one, don’t want employers to get super excited that now you can just give a stipend to your employees if they don’t get coverage. There’s a whole lot more that goes into the administration of an ACRA plan behind the scenes, but definitely something possibly worth givling. Okay, now we’re going to go through key changes for twenty twenty six. All right, so just that quick checklist to start twenty twenty six ACA reporting. Recalculate ALE status and full time employee count. You don’t want to think last year I wasn’t an ALE and so I don’t have to ever worry about it. Every year employers need to confidently be able to say we’re definitely under or we’re definitely over the fifty employee full time equivalent account. Definitely want to be validating affordability thresholds for the new year prior to your plan start. You do not want to find out after you’ve already been offered coverage that what you’re offering is not affordable. Unfortunately, the IRS is going to penalize you for that. Confirm coding logic matches with current plan design. So this is that annual transition where everyone stares at line fourteen and sixteen pretending they completely understand them and knowing that it matches their plan design. This is where software can definitely help you, vendors and subject matter experts can actually help you. Just make sure that what you’re doing matches what you’re reporting. And then keep up with those plan or organizational changes. That means like mergers, acquisitions, and EINs. ACA loves when companies make operational changes right in the middle of reporting season because it’s going to keep things really exciting and you would really rather ACA season be boring. For sure. So we want to start preparing now for that twenty twenty six ACA reporting year. Like we talked about when we presented that timeline earlier, companies that are successful with ACA are not looking at this once a year. It has become part of their processes and they’re making sure that they’re paying attention to it throughout the year. So most ACA penalties come from preventable errors. It’s a very professional way of saying someone forgot to double check spreadsheet, right? Recurring reporting errors, this is something that you don’t wanna have happen. Nobody wants a target on their back from the IRS. And if you repeatedly do the same thing, you’re probably gonna draw attention to yourself. Payroll and benefit systems should absolutely match each other. Somehow this continues to be one of the greatest fantasy concepts in compliance. I can just take data from one place and put it with data in another. Don’t have to look at it. It’s all gonna be the same, right? Even though those two systems don’t talk to each other, that’s a bad plan. The final pre submission review, this might feel like this is a waste of time. But if you’re reviewing things throughout the year, wouldn’t you rather know in March March that you missed somebody you were supposed to offer coverage to back in January and potentially only be in the hole for three months as opposed to finding them in December and now owing twelve months arthrofurantoins? Those pre submission reviews will save you headaches throughout the year. And then that year end, that year round ACA monitoring, we know it sounds boring and to be fair for most people other than those crazy folks in ACA probably is a little boring, but it is significantly better than the fun of having to respond to an IRS. Yes. We like to say thirty minutes a month at least, nationally? Coffee break. Take a coffee break, review your ACA. Yes. Yeah. So Ashley kind of mentioned this before. The government has worked to ease the administrative burden for employers slightly over the years. Employers can satisfy the requirement to furnish these forms of ten ninety five c’s to employees by posting a notice on their website advising employees that the form is available upon request. This is the same relief that has been available to the carriers for the ten ninety five b forms now for for a number of years. It’s not the easiest thing to to to do, I guess. You you you have to have a clear and accessible notice on your website. The forms have to be, you know, generally available to employees without a login if you’re gonna use it for, you know, say former employees, and you have to be able to furnish a copy within thirty days of a request. So Stacy, if an employee asks me for a form and I tell them you can go grab them off our electronic employee portal. Is that satisfactory? Yeah. If they if they have requested it electronically from you, you know, via email, then you could send them a link to to go get it if they if they didn’t request a paper copy. They request a paper copy. You gotta give them one. So they have to be explicit and say, and I want it electronically. Well, if they were if the request comes in electronically, I think you could probably give it to them electronically. You know, it might depend a bit on what they say. If they request a paper copy, you gotta give them a paper copy. You can always ask, say, the electronic copy is available here. Here’s a link. You let us know if you want a paper copy. Thank you. That’s good to know. So why does the Paperwork Reduction Act matter for employers? So obviously cost benefit is a big one, right? Under the new rules employers can reduce printing and mailing costs by using like Stacy said that website notice approach instead of automatically mailing all of them out the door. It modernizes delivery. I mean, it is twenty twenty six, we live in an electronic age. So this change supports electronic communication strategies that employers are likely already using anyway. It’s definitely a better fit for large employers, especially employers like staffing firms or construction hospitality companies that have a lot of turnover. As we all know that also typically comes with people changing addresses and things like that. So an on request model helps reduce undeliverable forms and still meet those compliance requirements. At the end of the day ACA reporting has finally entered the year twenty twenty six in the electronic age because not everybody wants to print mail and kill a bunch of trees. That seems more like the medieval tax collection systems than the day and age we live in now. Okay let me go ahead and launch our next poll. Okay, if I get an IRS letter, will I need to pay a penalty? Yes, no, or unsure. Okay, it looks like twenty eight percent said no seventy two percent are unsure. You know technically the answer really is no, but emotionally the minute everybody saw IRS they stopped they started panicking. Exactly, exactly. Okay. Now we’re going to go into our very last short segment before we wrap up on ACA penalties. Yeah. So these are the two possible penalty regimes under the employer shared responsibility provision. They call them the A and the B penalty named after the sections of the Internal Revenue Code in which they appear. But the A penalty is also known as the sledgehammer penalty, and this one applies when you fail to offer coverage to at least ninety five percent of your full time employees and you have one or more full time employees who obtains a premium tax credit in the marketplace. And if that happens, then the potential penalty is three thousand three hundred and forty dollars per full time employee per year minus the first thirty employees. So this one, all it takes is if you don’t offer coverage to your full time employees and even one employee gets a premium tax credit, this sledgehammer penalty will apply. The B penalty, they call it the tack hammer penalty, and this one applies when the employer does offer coverage to at least ninety five percent of their full time employees, but one or more full time employees was not offered affordable coverage and that employee went to the marketplace and got a premium tax credit for marketplace coverage. So same way to trigger the penalty. However, the B penalty only applies based on each full time employee who wasn’t offered affordable coverage and who went to the marketplace to get a premium tax credit. So while the dollar amount is higher, just from a pure dollar perspective, the way it’s calculated makes it much lower than the A penalty. The A penalty can be hundreds of thousands, millions of dollars for larger companies, where the b penalty is in the tens of thousands or maybe low six figures for a big company that has major affordability issues. So, you know, why have I received a love letter from the IRS? So these types of letters, generally the two twenty six J letters, are when you have filed your forms, but maybe you didn’t offer coverage to your full time employees. So maybe didn’t offer minimum essential coverage, that’s going to be the A penalty. And of course, it only gets triggered if you fail to offer coverage and one or more full time employees receives a premium tax credit to subsidize their individual market insurance. It can also be triggered by simple reporting errors. There are so many times where we see these penalty letters for millions of dollars that are caused simply by the reporting vendor not stating that the group offered coverage to ninety five percent of their full time employees. And then another type of letter you might get, and this one you really got to pay attention to, and that is the letter when the IRS says, hey. We think that you are a large employer. We didn’t get your forms. Where are they? If you do not respond timely to that type of letter, you will have significant civil penalties imposed, and it is just extremely painful to try to get them abated. Okay, and another poll. I want to thank everyone for your participation in our polls. And let’s see if I goofed. I goofed and didn’t put this in the poll section. So, everybody can answer in the chat. What do you believe is the most appropriate first step after receiving an ACA penalty letter from the IRS? Is it review the letter thoroughly and compare it to your filings? I’m sorry. I watched somebody put D and that’s my kind of person because that’s D, immediately pay the penalty to avoid further issues. C, just worry about it when you have some time. And D, Ashley’s favorite, put it in a drawer and forget about it. So if you don’t mind, go ahead within your chat and we’ll just look. To be clear, putting it in a drawer is technically not an IRS approved strategy, but you’d be surprised how often it happens. Write down my contact info if you want me to see It looks like other than the day, we got all As and one B. You don’t want to immediately pay it, right, Stacy? No. No. Gotta take a look first. I’m sure the IRS would be happy if you did that. But And if you did pay it, you can always appeal it after and get a refund if you if you’re entitled to one. So if you get one of these penalty letters, you got to address it as soon as possible. You need to get it to someone that really knows what they’re looking at and knows what they’re doing with these letters. You may have a very tight time frame to respond. There’s a lot that that goes into this. You you probably don’t wanna do this at home. You know, you’re you’ve already gotten the penalty letter probably because you have been doing it yourself. So, you know, engage qualified counsel to help prepare the response. Certain letters will allow you to get an extension, others won’t. You may need to dig up your records because usually the letters are gonna be referring to tax year maybe twenty twenty four, twenty twenty three, or even prior. And then, you know, marshal your defenses and, and submit your response. So, there are various penalty letters that you might receive. Letter two twenty six j is the proposed ESRP penalty. And this one, you know, hopefully, you have an answer for maybe your reporting just, you know, had a couple of errors in it. If and if you’ve offered affordable coverage, you know, we and and Solarix can can help you respond to these letters and and get the penalty abated if you’ve been if you’ve really offered affordable coverage. Letter five thousand six hundred ninety nine is the IRS saying, hey, we think you’re a large employer based on the number of W-2s that you filed. Where are your forms? This one, it is critical that you respond timely, that you know what you’re doing here. If you fail to respond timely to the letter fifty six ninety nine and some of the follow ups, then civil penalties will be imposed. They are different than the ESRP. They’re harder to remove, and you the IRS has been more rigid in terms of what they will accept for reasonable cause. So you really I can’t stress enough if you get one of these letters, you gotta get it to to qualified counsel. Letter nine seventy two CG, you might get if you have filing inconsistencies, maybe your transmission was indecipherable or had some other issue, or maybe you had too many name and social mismatches. You often have ninety days to respond, but depending on where you are in the process, sometimes you might have less. So it’s important to read the letters, copy every page, they’re double sided. Sometimes we get letters sent where it’s every other page, just makes it harder to decipher. So anybody that’s ever done a webinar, at least with me, knows that somewhere along the way, I’m probably gonna include a dad joke. And unfortunately, I didn’t come with any dad jokes today. However, I do have a nifty cheesy little poem to remember the letters that come from the IRS. So letter two twenty six J may ruin the CFO’s whole day while five six nine nine nine says your deadline got away. The nine seven two arrives to say what a shame. And all need responses before ninety days in the game. Okay. We need to put that to pen to paper. That’s my cheesiness for today’s episode. Can you make it into a haiku though? Right? Probably not. You’re getting some people clapping. All right so key takeaways from everything we’ve talked about especially with penalties. Most ACA penalties don’t happen because employers intentionally ignore the rules. They happen because small reporting errors quietly snowball into expensive problems. The IRS enforcement is no longer theoretical. They are active. They are out there gathering money. They need it. They want it. They’re gonna come find it. Corrections should definitely be made immediately. The longer you wait, the harder, more expensive they become to fix. Think of it this way, ACA is not like fine wine. You don’t want it to age. And then one final review, like we’ve talked about which catch those coding mistakes, affordability issues, eligibility inconsistencies, and missing data can save you a lot of headache later because that will reduce your risk. AC compliance is one of those things where being proactive feels expensive and time consuming until you find out what the reactive costs are going to be. Okay, our very last poll before everyone leaves us for today. What’s your next step after today’s session? You’re going to review your ACA process internally. Do you need a look into tools to improve accuracy? Are you going to discuss internally with your team or no immediate next steps? And while everyone’s answering that, I will go ahead and ask you guys a question we have. Back to the control group, our owners in the S Corp, should they get the ten ninety five C or not? Yeah. So they they don’t. They’re considered owners and not employees if they’re greater than two percent s corp owners or even any I think it’s any s corp owners. They’re they’re excluded from the definition of full time employee. Okay. And do we need to fill out section three for family members on the ten ninety five c? Only for self insured plans, you would fill that out for the employee and any family members who are enrolled in the coverage. And let me add, that includes levels funded as well? Yes. Perfect. And while we wait for more questions to roll through, you can look on your screen now and next month, as I mentioned earlier, is part of our Back to the Basics series, and it’s a timely one for the summer, managing seasonal and summer employees hosted by our own Ashley Pope. You can go ahead and scan that code. What Ashley? I’ll make sure I have a dad code for that one. Yes. And some resources on the side you can download as well. And it is a greater than two percent s corp holder that is excluded from getting the ten ninety five c, not just any s corp owner. Gotta have two percent. Most are more than two percent, but just to be clear. Okay. And I think that may conclude our questions. I don’t see any more coming through. So everybody will be receiving that recording tomorrow. Then next week after Memorial Day, be looking for the SHRM credits. I’ll be emailing those out. And I want to thank our hosts and all of our attendees for their time today. Thanks everyone. Bye everyone. Thank you. Bye.
