May 16, 2014 Compliance Observer – Be on the Lookout for Tax Credit Notices

Compliance Observer - April 16, 2014

Be on the Lookout for Tax Credit Notices!

 May 16, 2014

Now that open enrollment in the health insurance exchanges (the “Marketplace”) has ended, employers should be on the lookout for Marketplace Tax Credit Notices to indicate if an employee has received a premium tax credit (subsidy) through the Marketplace. The IRS will begin sending these notices soon and employers need to be prepared when they do.

An individual is only eligible to receive a subsidy if he/she is not eligible for minimum essential coverage through his/her employer or if the coverage provided by the employer is unaffordable. In some instances, individuals have received subsidies in error because of misunderstandings on the eligibility requirements or inaccurate information provided when they applied for coverage. It is important for employees to know that if they have received a subsidy in error they will be required to pay back the subsidy when filing their income tax return.

Beginning in 2015, for employers with more than 100 employees, and in 2016, for employers with 50 to 99 employees, if a full-time employee receives a subsidy an employer may be subject to a tax penalty, therefore employers will need to timely evaluate and respond to Marketplace Tax Credit Notices that are incorrect.

What should employers do?

  • Educate employees. Remind them that anyone who is eligible for affordable and essential employer coverage is not eligible for tax credits through the Marketplace. If the employer offers dependent coverage, then those dependents are also not eligible for subsidies (even if dependent coverage is not employer subsidized). Again, there may be tax penalties for incorrectly claiming subsidies for exchange coverage.
  • Designate a person or persons responsible for promptly reviewing, tracking and responding to these notices.
  • Educate mail room employees, management and other key employees about these notices. Establish and communicate a process to ensure the notices are circulated to the person(s) you have designated to respond.
  • Respond promptly to any notices sent on behalf of employees who are eligible for coverage. Employers have only 90 days to appeal the exchange’s determination of eligibility for the premium tax credit.
  • Personally address any employees who incorrectly claimed a subsidy and inform them of the potential tax consequences for doing so.

Contact your AssuredPartners NL Benefit Team if you have questions or need assistance with these or other compliance matters

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