Details of Public Law 118-168, Section 5 , 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.

Taxes are generally required to be assessed within three years after a taxpayer’s return is filed, whether or not it was timely filed. There are several circumstances under which the general three-year statute of limitations period does not apply. If a return is not filed, if a false or fraudulent return with the intent to evade tax is filed, if a private foundation status is terminated, or if a gift tax for certain gifts is not properly disclosed, then the tax may be assessed, or a proceeding in court for collection of such tax may commence without assessment, at any time. Additionally, other exceptions to the general rule can result in an extension of the statute of limitations period.

This provision extends the statute of limitations to assess the ESRP to six-years from the due date of when the Form 1095-C – Employer Provided Health Insurance Offer and Coverage is filed.

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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