As part of the enforcement of the employer mandate under ACA, employers will receive letters from the state and federal exchanges regarding persons who did the following:
- They went to the exchange,
- Received coverage from that exchange,
- Listed a specific employer as their employer of record at the time, AND
- They received a subsidy which reduced the cost of that coverage to them and their family
All of these things must happen in order for you to receive an exchange letter as an employer. You will also notice that we did not say that they were an employee but rather called them a ‘person’. The reason for this is that we are seeing many instances where persons reported to the exchanges that they were an employee of ABC Corporation when they were not. This is a critically important point for employers because we often will hear an employer say, “We did not respond to the exchange letter because it wasn’t our employee”. Wrong answer!
You must respond to all exchange notices regardless of the circumstances under which you received one because you are essentially guilty until proven innocent. The same thing goes for part time employees or other individuals on whom you receive an exchange notice but did not have a duty to provide them coverage. If you simply do not respond to the exchange letter then your time will be up after 90 days and you will be sent a bill for the penalties on that person.
What should be included in responding to Exchange Letters?
Although there has not yet been specific guidance provided in how to respond to exchange letters, it is reasonable to believe you should include any pieces of information and documentation regarding the employment and offer of coverage to the person in question. This could include payroll records, dates of employment and an overall explanation of your position. It should also certainly include a copy of the form 1095-C on this person which was E-filed to the IRS.
Are you beginning to see why having correct ACA reporting is of such critical importance? If you would like to learn more about this as well as all of the changes in ACA reporting from 2015 to 2016, take a look at our recorded webinar entitled, “2016 ACA REPORTING – PLANNING FOR THE 2016 UPDATES AND NEW REPORTING FORMS”