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No Statute of Limitations Applies for ACA Pay or Play Penalties

On February 21, 2020, the Internal Revenue Service (IRS) Office of Chief Counsel released a memorandum that eliminated the statute of limitations on pay-or-play penalty (a.k.a. the employer mandate) assessments under the Affordable Care Act (ACA). As such, the memorandum eliminates the timeframe restrictions as to when the IRS can issue a penalty for employer noncompliance with the ACA pay or play regulations. In fact, the guidance of the memorandum notes that penalties can potentially be issued to employers five, ten or even twenty years later for current violations.

For 2020, the pay-or-play penalty amount is $2,570 per each full-time employee, minus the first 30, that will be assessed if the employer fails to offer minimum essential coverage (MEC) to at least 95 percent of its full-time employee population and their dependents. A dependent is defined as an individual who is the son, daughter, stepson or stepdaughter up to age 26. Additionally, MEC is coverage that is offered to employees that meets the following criteria:

  1. Covers at least 60 percent of the average medical costs across a standard employee population (i.e., similar to a bronze plan in the individual and small group market), and
  2. Provides “substantial coverage” for inpatient care and physician treatment.

Based on the memorandum, it is essential that employers ensure that the ACA MEC guidelines are followed to eliminate the possibility of fees being assessed.

Read the Legal Update.

Our Cowden team is here to help. If you have questions regarding the IRS memorandum or any ACA compliance need please contact a member of your Cowden team.