Even if your organization has yet to receive a marketplace notice (also called an exchange notice), you should have a plan in place for addressing them. Exchange notices are not a penalty assessment, and receiving one doesn't mean an IRS penalty is forthcoming. But having a plan in place for the year will make life easier for you and your employees at tax time.
Exchange notices are an early warning system — if you have an employee who enrolls in coverage through the exchange and receives a subsidy to offset the cost, you'll receive an exchange notice if the employee provides the exchange with your organization's name and address.
Notices can come throughout the year since people can enroll in exchange plans year-round if they report a qualifying event that triggers a special enrollment period. According to the IRS, any penalties that apply won't be assessed until the following year after you file your ACA informational reporting.
Monitor Notices in Real Time
It's possible you have employees who should've been offered coverage under your plan but weren't. Or, you might've offered coverage but failed to ensure it's affordable or providing minimum value. The exchange notices are your warning that a penalty might be coming once year-end reporting is complete. If you haven't planned for this, a real-time adjustment in your coverage offer can help mitigate IRS penalties.
In some cases, an employee may have enrolled in subsidized coverage through the exchange despite the fact you offered them affordable, minimum value coverage. In this case, a timely appeal helps set the record straight. If your appeal is successful, the exchange will direct your employee to update their application for coverage with accurate information regarding your offer of coverage. This will reduce the amount or even prevent your employee from having to pay back the subsidies on their tax return and could prevent an erroneous IRS penalty assessment on your organization.
Formulate a Strategy
Here are four ways to have a strong strategy for handling marketplace notices.
1. Watch for Mail
If your organization has multiple locations, ensure that whoever handles the mail at each office is aware of the importance of exchange notices. You might want to implement a process for forwarding the notices to a central location where the details can be addressed.
2. Stay Objective
You also need to ensure that whatever process you're implementing for addressing marketplace notices is being carried out by a member of your team who isn't in a managerial role over the employees in question. This will help you avoid any possibility that employees might face repercussions for enrolling through the exchange and potentially triggering the employer shared responsibility penalty.
3. Decide on Appeals
When you receive an exchange notice, you have 90 days to appeal it — if you feel an appeal is warranted. Keep in mind that the employee will be notified of the appeal, and if you prevail they'll be given a chance to appeal that too.
4. Keep Records
Regardless of whether you appeal or not, you'll want to document everything about the exchange notices you've received and your responses to them, as that information will be useful if you do face IRS assessments at a later date.
Consider an ACA Compliance Vendor
Your response to exchange notices is going to depend on the specifics of the situation. You'll need the ACA compliance data you've compiled throughout the year, including coverage offers and responses, affordability and minimum value details and employees' designations as full-time or not.
You could manage your response to exchange notices internally, but a third-party ACA compliance vendor could streamline your efforts and help you reconcile current employee metrics for coverage offers and affordability. The more visibility you have into your ACA compliance tracking throughout the year, the easier it will be to reconcile exchange notices and determine what action, if any, needs to be taken.
Regardless of the specific situation, exchange notices are not something you want to stick in a drawer and forget about until tax time. They can be a valuable tool for keeping track of your organization's potential exposure to penalties and ensuring you've offered coverage as required.
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