Extra Reporting Penalties Add to Burden for Employers

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By Kristen Ricaurte Knebel

Additional penalties could apply for employers based on Affordable Care Act noncompliance in 2015 because recently enacted trade legislation increased penalties for failing to file correct information returns.

These penalty increases are significant, particularly because ACA reporting for applicable large employers is to occur soon for 2015, the first year for which the reporting is required, Gretchen K. Young, senior vice president of health policy at the ERISA Industry Committee, told Bloomberg BNA on July 27.

The Trade Preferences Extension Act (Pub. L. 114-27), signed into law June 29, increased penalties for all information returns, including Forms W-2 and 1099, and the ACA reporting Forms 1094-B, 1094-C, 1095-B and 1095-C.

Under the law, the penalty for each form would increase to $250 from $100, with the maximum total annual amount imposed doubling to $3 million from $1.5 million. However, if the return that would be filed with the Internal Revenue Service were corrected within 30 days, the penalty would increase to $50 from $30, and the maximum total amount would rise to $500,000 from $250,000.

Good-Faith Reporting Standard

“The one moderating influence is that we have a good-faith reporting standard for next year” on ACA reporting, Young said. “So I assume that that will be taken seriously and relatively few of these reporting penalties will be assessed.”

These changes came at an inopportune time for employers, said Kathryn Wilber, senior counsel for health policy at the American Benefits Council.

“This timing is I think rather unwelcome for employers who are faced with a complex reporting requirement to be implemented for the first time and are working hard,” she told Bloomberg BNA.

The penalty increases are particularly significant because they apply for form copies filed with the IRS and those furnished to employees, Elizabeth T. Dold, a principal with Groom Law Group Chartered, told Bloomberg BNA on July 27.

Limited Relief

“There is some limited relief for the ACA that is specific to the ACA, but they are going to have at least millions of returns with the ACA, so even if we have transition relief, this is huge going forward,” Dold said.

The penalties were expected to rise in another year, but only at the cost of living rate, which would be “baby dollars compared to this,” she said, so people are very concerned about the shift.

Another obstacle is that many of the penalties are automated, with a small chance of getting the IRS to agree to a reasonable-cause waiver, Dold said. Under tax code Section 6724, penalties are not assessed if a failure to file is a result of reasonable cause and not willful neglect.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at kknebel@bna.com

To contact the editor on this story: Michael Trimarchi in Washington at mtrimarchi@bna.com