Details of Public Law 118-168, Section 4 , Employer Reporting Improvement Act

The Patient Protection and Affordable Care Act (also called the Affordable Care Act, or ACA, Public Law 111-148) requires applicable large employers (ALEs) to provide affordable health care coverage and at a minimum value to their employees. If an employee must purchase individual coverage from the Health Insurance Marketplace because the ALE did not provide affordable coverage, then the ALE must make an employer shared responsibility payment (ESRP) to the IRS.

Specifically, the ALE must make an ESRP if one of the following apply: 1). the ALE does not offer coverage or offers coverage to only 95 percent or less to their full-time employees and at least one of those employees receives a premium tax credit, or 2). ALE offers coverage to 95 percent of its full-time employees and at least one full-time employee of the ALE receives a premium tax credit to purchase individual coverage from the Health Insurance Marketplace.

Based on the information on the Form 1095-C – Employer Provided Health Insurance Offer and Coverage filed, along with the employee’s individual tax return filed with the IRS, the IRS will determine if an ESRP is due. If the ALE is liable for the ESRP, the IRS will provide an initial letter (226-J) and require the ALE to respond within 30 days.

This provision modifies the response timeframe from 30 days to 90 days for employers to respond to the initial letter (226-J) before the IRS proposed assessment for the ESRP is issued.

California does not conform to or adopt the ESRP imposed on ALEs. As a result, the changes made by this provision would not be applicable for California purposes.

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