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IRS enforces ACA employer shared responsibility, reporting rules

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August 2019


The Affordable Care Act’s (ACA’s) employer shared responsibility provisions (ESRP) — also known as the employer mandate — require certain employers to offer minimum essential coverage to 95% of their full-time employees or potentially pay an ESRP penalty to the IRS. Failure to satisfy certain related information reporting requirements also can result in penalties. The IRS has been issuing penalty notices relating to the 2015 and 2016 calendar years and has begun issuing penalty notices for the 2017 calendar year. 

Affected employers should be prepared to receive Letter 226J and information return penalty notices, such as Notice 972CG, proposing penalties and requesting additional information. Employers should respond timely to such notices to avoid having the IRS issue notice and demand for penalties without having received additional information from the employer that could reduce or fully abate any penalty.

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The takeaway

In light of IRS enforcement activities, employers subject to the ESRP and information reporting provisions may want to consider an ACA penalty risk assessment review of Forms 1094-C and 1095-C filed for prior years to determine whether they have exposure for either ESRP or information return penalties.  Employers should check whether all required Forms 1094-C and 1095-C have been filed correctly, and whether employer-level information, such as whether minimum essential coverage has been offered to at least 95% of full-time employees, has been correctly reported on Forms 1094-C. Additionally, employers should consider a review of their ESRP and related information reporting procedures to review compliance with the requirements and be prepared with information needed to challenge any proposed penalties.

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Kevin Brown

Principal, Tax Controversy and Regulatory Services Leader, PwC US

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