Although the employer mandate under the Affordable Care Actisn't new, this is the first year that the IRS is attempting to collect penalties from companies that didn'tshell out—for violations incurred in 2015.

But according to a reportin Modern Healthcare, they may have a fight on their hands. Thepenalty, which helps fund the ACA, is assessed if a company with atleast 50 full-time employees didn't offer minimum essentialcoverage to at least 70% of its workers and their dependents, andat least one employee was eligible for an advanced premium taxcredit.

In addition, companies that offered the option of a qualifiedplan to at least 70% of their full-time workers and theirdependents are also on the hook for the penalty if a full-timeemployee couldn't afford the offered plan and qualified for anadvanced premium tax credit.

But there could be grounds for a legal challenge, according tothe report, and most companies sent IRS assessments of theirmandate penalties are appealing them. The reason? Companies arearguing that federal and most state exchanges haven't followed therules set out in the ACA statute and regulations and thereforecan't levy the 2015 fines.

And those fines are pretty hefty. The report cited one letterfrom the IRS that assesses “a penalty of more than $3.8 million.The company in question received the notice on Nov. 8 and had 30days to respond with the money owed or evidence that the IRS waswrong about the penalty.”

ACA regulations said that exchanges, not the IRS, were supposedto send employers certified notices regarding which of theiremployees enrolled in an exchange plan subsidized by a premium taxcredit for one month or longer. Only three state-basedexchanges—from Maryland, Connecticut and Washington state—sentcertifications for 2015. And according to health law consultantChris Condeluci, cited in the report, since most exchanges didn'tsend notices, it could mean that they didn't have a system in placeto do so.

According to Condeluci, the report says, employer groups areseriously considering legal action while waiting for Congress topass a retroactive repeal of the penalty.

Some companies were exempted in 2015, with the governmentviewing it as a transition year, and some of those exemptions undertransition regulations extended into 2016. But if the penalty isn'trepealed, all employers will be on the hook in 2017. Andconsidering how dubious it is that Congress will get a moveon—especially without Democratic support, as how to pay for therepeal is an ongoing discussion—there's no way to know when, or if,existing bills aimed at repeal will be brought to a vote.

From: BenefitsPro