What HR Leaders Need to Know About Marketplace Notices
This article was updated on Aug. 27, 2018.
Many organizations are figuring out what to know about marketplace notices. By now, you may have received one or more of these notices, as marketplaces began sending them to employers in 2016. These notices let you know that your employee has enrolled in a health insurance plan through the marketplace and has received an advance premium tax credit (APTC).
The marketplace notices are generated if your employee attested that no offer of employer-sponsored coverage was provided, an offer of coverage was made, but it wasn't affordable or didn't provide minimum value or an offer of affordable, minimum value coverage was made, but a waiting period applied and the employee wasn't yet eligible to be covered under the plan.
Qualifying for an APTC
In some cases, the information the employee provided the marketplace might be correct, and the organization doesn't need to take any action. But in other cases, the employee may have erroneously qualified for an APTC in the marketplace. For these situations, you'll want to appeal the marketplace notice within 90 days. If successful, you may minimize a penalty assessment from the IRS. But the impact of erroneously applied APTCs is important for your employees too.
If your employee told the marketplace they aren't eligible for affordable, minimum value employer-sponsored coverage — and that is incorrect — they could be on the hook for paying back a chunk of money to the IRS. Eligibility for tax credits in the marketplace is based on income and whether other coverage is available. Even if an applicant qualifies for tax credits based on income, if they have access to an affordable employer-sponsored plan that provides minimum value, no tax credits are available in the marketplace.
Subsidy Reconciliation
But this data doesn't officially get reconciled until well into the next year, when employers file Form 1095-C with the IRS. So an employee might enroll in a plan through the marketplace in January, tell the exchange that affordable, minimum value employer-sponsored coverage is not available and receive APTC throughout the year. But when the employer files Form 1095-C, it's discovered that coverage was available to the employee. For the employee, at least some of that tax credit has to be repaid to the IRS during the subsidy reconciliation process.
The IRS caps the amount of the subsidy that has to be repaid, as long as the employee's total household income ends up being under 400 percent of the poverty level. If your employee's household income is under 400 percent of the poverty level, the IRS could require repayment of up to $2,500 in subsidies if it turns out that the subsidies were awarded erroneously.
Communication Is Key
Finding out an APTC must be repaid while filing a tax return is likely to be an unwelcome surprise, which is why communication between employers and employees is so important. If you receive a marketplace notice for one or more of your employees, here are four things to keep in mind.
1. Ensure there's no possibility employees could face repercussions or any sort of discrimination based on the marketplace notice. If the APTC was not provided erroneously, and it's going to result in a shared responsibility penalty for the organization, the employee cannot face any sanctions as a result. Because of this, you'll want to be sure that whoever communicates with the employee about the marketplace notice is not in a supervisory role over the employee.
2. Assuming you did offer affordable, minimum value coverage, it will help if you have concise information to provide the employee explaining what was offered and why it met the requirements.
3. Advise your employees that data regarding coverage offers is transmitted to the IRS during the tax filing season, and remind them that they will have to reconcile their subsidy when they file their own return the following spring. If they're receiving a subsidy in the marketplace when they've got access to an affordable, minimum value offer of coverage from your organization, some or all of the subsidy amount will end up having to be repaid at that point.
4. Make sure your employees know that even if they declined the plan you offer, they're still considered eligible for employer-sponsored coverage, despite the fact they may not be able to enroll until the next open enrollment period.
By determining what to know about marketplace notices, it's easier to communicate health insurance options to your employees ahead of time. Moreover, doing so can help you avoid a lot of hassle. Much of this information will be included in your notice to employees of marketplace coverage options. But ensuring your employees understand their options and the implications of their decisions — before they decline your coverage or enroll in a marketplace plan with an APTC — will make it less likely that you have to deal with unexpected marketplace notices.
