United States: Marketplace Subsidy Notices What Companies Need to Know

Posted on 11 May 2016 by Admin   |   Filed under Market, internet Comments (11)

There are two possible penalties under the company shared duty (or pay-or-play) mandate the "A Penalty" and the "B Penalty". The A Penalty might be examined versus an appropriate large employer (a company with 50 or more full-time employees and equivalents) if the employer fails to provide minimum vital protection to at least 95% of its full-time employees and at least one full-time worker enlists in the Marketplace and receives a premium subsidy. The B Penalty might be evaluated against an applicable large employer even if the 95% threshold is met if a full-time worker is provided unaffordable coverage or coverage that does not have minimum value.

An employer getting a FFM subsidy notification is not instantly based on a shared duty penalty. CMS has no authority making penalty determinations under Code Section 4980H any such determination will be made individually by the IRS. The IRS has not yet provided concrete procedures related to penalty assessments under Code Section 4980H, however it has actually indicated that companies will have the opportunity to appeal assessments.

Various scenarios might exist under which a staff member is entitled to a premium subsidy without triggering a charge on the company. It may be that the staff member was disqualified for coverage under a multiemployer strategy, but the employer cannot be assessed a charge based on the special interim assistance for multiemployer strategy protection.

CMS cannot enforce either the A or B Penalty, the IRS might later enforce a charge and it would be valuable for an employer to have a record revealing that the subsidy determination was appealed and dealt with in favor of the employer. When the employee is not a full-time employee, or some other circumstance exists such that the employer cannot be assessed a penalty, an employer would have less incentive to challenge the subsidy decision.

If a company chooses to appeal a FFM's subsidy decision, the appeal must be submitted no later than 90 days after the date the company got the notification. If the appeal is resolved in favor of the employer, the appropriate employee will receive a notice from CMS asking them to upgrade the Marketplace application. The staff member will likewise be informed that the failure to update the application could later result in tax liability.

When completing a Marketplace application, workers are most likely to enter the address of their worksite, which might not have HR representatives staffed at that location. For that reason, employers with numerous worksites must set up an internal mechanism for identifying the FFM subsidy notices and routing them to the right individual. These internal procedures will help avoid accidentally missing out on the 90-day deadline to appeal a subsidy determination.

In each case, companies ought to examine their internal records to identify if there is any charge risk. If a worker's invoice of a subsidy could trigger a charge under Code Section 4980H, employers need to consider appealing the subsidy decision if there is a basis on which to do so.