Rumor has it that nearly 500,000 Marketplace Notices dated June 21, 2016 were sent to employers from the Department of Health and Human Services (HHS). If you haven’t received one already, count yourself lucky. Many employers began receiving these notices just before the July 4th holiday weekend. The notices are designed to inform an employer that an individual has (1) purchased coverage in the Marketplace, (2) received a premium tax credit (APTC) or cost sharing subsidy (CSR) or both for at least one month in 2016, and (3) indicated that they were employed by the company to whom the notice is addressed. Efficient processing of these notices is a key element of successful employee benefit management.
First, determine if any of the information contained in the notice is incorrect. Filing an appeal is not required, but is recommended if any of the information in the notice is incorrect. Incorrect information can mean the individual was determined eligible for APTCs or CSRs when they shouldn’t have been. There are two potential consequences if an individual is improperly determined eligible for APTCs or CSRs: (1) the individual may have to pay back any APTCs or CSRs received when a correction is made and (2) the employer may have to appeal an erroneous penalty notice from the IRS at a later date. Appealing a Marketplace Notice can prompt a correction by the Marketplace, which can lessen the burden to the individual should APTCs or CSRs need to be recouped, and may avoid an erroneous penalty notice to the employer from the IRS.
Second, determine if an appeal is necessary. An appeal should be considered if the individual named in the notice:
- waived affordable, minimum value employer-sponsored group health plan coverage for all months of 2016, or
- enrolled in employer-sponsored minimum essential coverage for all months of 2016 (regardless of whether or not it was affordable or minimum value), or
- was not an employee for any month of 2016.
If either of the first two apply, the individual should not have been eligible for APTCs or CSRs. If the third applies, the employer was not responsible for making an offer of coverage to the individual in 2016 and the individual’s application in the Marketplace should be corrected to avoid inadvertently triggering a penalty notice to the employer from the IRS.
On the other hand, if none of the above three factors apply, an appeal is not necessary because the APTCs or CSRs may have been appropriately granted. Appropriately granted APTCs or CSRs do not necessarily mean the employer will receive a penalty notice from the IRS. For example, the named individual may be a part-time employee not eligible for employer-sponsored coverage. Alternatively, the employee may have been newly hired in early 2016 and had to satisfy a waiting period before employer-sponsored coverage became effective. In either case, the employer is not at risk of penalty from the IRS for failure to comply with Internal Revenue Code §4980H, the Employer Shared Responsibility Mandate. An employer penalty is only triggered if the individual was a full-time employee of an applicable large employer and not offered affordable, minimum value coverage before the fourth full month of employment.
Third, if filing an appeal, be sure to provide only the information necessary to demonstrate the information contained in the notice is incorrect. For example, you may want to provide proof of enrollment in the employer-sponsored minimum essential coverage. Or, in the case of a full-time eligible employee who waived coverage, proof of waiver of affordable, minimum value coverage. Finally, in the case of an individual no longer employed, date of termination.
Fourth, be careful not to include personally sensitive information. The notice contains only the name, month and day of birth (not year), and the last four digits of the individual’s social security number. Be careful to ensure any information submitted in support of the appeal similarly protects sensitive information and does not contain the individual’s full social security number, full date of birth, or address. Be particularly careful of payroll reports – they may contain banking information for the individual that should not be included in the appeal.
Finally, be sure you have a well-defined process for managing these notices. If an appeal is necessary, it must be completed within 90 days of the date on the notice. Copies of the notice, the decision making process used to determine if an appeal is necessary, and of course, the appeal if one is submitted, should all be saved in a secure location.
If you have any questions about the Marketplace Notice, the appeal process, or the Employer Shared Responsibility Mandate, contact your benefits advisor.