Responding to marketplace notices can feel like a daunting prospect for organizations that are not properly prepared. Many businesses have begun to receive these notices from either the federal or state marketplaces/exchanges, indicating that at least one of the organization's employees has qualified for a subsidy toward the payment on the insurance coverage they bought on such an exchange. In addition, according to an ADP white paper, nearly 30 percent of organizations said responding to marketplace notices is a significant challenge. This had led many of these organizations to wonder what, if anything, should be done in response to the receipt of such notice.
An organization that receives such a notice has three basic options to consider:
2. Do nothing
Here's a breakdown of your options, and what each choice will mean for your organization.
1. Use the Marketplace Appeal Process
If the organization believes the employee has provided false information that may lead to an IRS penalty, it could be advantageous to preemptively correct the record. If the IRS accepts the organization's version of the information, it may reduce the chance of a penalty being assessed or could limit the proposed penalty amount.
However, the appeals process can be an administratively burdensome exercise for many employers, especially those without a dedicated compliance team. To this point, not a lot of information has been provided regarding the steps of the appeals process. Some of the state exchanges have implemented appeals processes that provide for hearings via telephone, while others have not.
Finally, it is important to remember that a successful appeal by the organization could result in the loss of a subsidy by the employee in question. Organizations should consider all of the ramifications of placing itself in an adversarial position with its employees before commencing the appeals process. On the other hand, an employee confused about their eligibility for a premium tax credit might be appreciative of the issue being brought to light before too many months go by thereby reducing the amount they need to repay to IRS.
2. Do Nothing
This may be the likely course of action if the information provided on the notice is correct. However, even if the organization believes the information provided is incorrect, it still may make sense to do nothing. This is because the receipt of a marketplace notice does not necessarily mean the organization will be assessed with a penalty. A penalty will not be incurred until the IRS sends out "certification" notices, the process for which has not yet begun. Therefore, it may make sense to wait and see before expending any resources on an issue that may not even be a problem.
While the receipt of a marketplace notice can be a frustrating experience, it is important for organizations to realize they have options. Remember that these notices do not necessarily portend a definitive fine, so weigh your options carefully before you make any decisions.
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