Five tips for human resources professionals to keep companies off IRS radar

New legislation routinely causes concern about effects on particular industries. For human resources professionals, who continuously work to keep their employers compliant, navigating the new Inflation Reduction Act is more about maintaining compliance with health care benefits laws that have been in place for over a decade.

“Compliance with the Patient Protection and Affordable Care Act (PPACA) is the key provision to protect a company from financial penalties,” said Larry Long, principal of StarMed Benefits, a Las Vegas-based, third-party administrator of employer-based, PPACA compliant, self-funded Employee Retirement Income Security Act (ERISA) medical benefit plans. “Since provisions of the ACA require companies to self-report compliance and non-compliance to the IRS through new tax forms, it is important that human resources professionals help management comply with the law.”

While the IRS is still clearing its backlog, $80 billion of the Inflation Reduction Act will be set aside for IRS tax enforcement, which includes ACA non-compliance. With more premium tax credits (PTCs) expected to be issued over the next few years and the increased tax enforcement under the Inflation Reduction Act, businesses must be aware the IRS is taking note of any employees who apply for PTCs.

According to the Society for Human Resource Management (SHRM) article, “Inflation Reduction Act’s Health Care Provisions Could Affect Employers,” the “receipt of PTCs is a trigger for the IRS to identify organizations that fail to comply with the ACA’s employer shared-responsibility mandate.”

Even for compliant employers, penalties are assessed by the IRS when new tax forms are not properly filled out or incomplete information is reported to the IRS, Long added.

“The largest trigger of a Department of Health and Human Services or IRS penalty is employees applying for subsidies on the state level when they are not eligible because the employer is offering compliant benefits,” he said.

Audits and penalties can eat up valuable time and resources for organizations even when they are maintaining compliance. To stay compliant and off the IRS radar, Long provided the following tips to keep your human resources department in the know for 2023:

  1. Offer compliant benefits each year to full-time employees during annual enrollment and to all new hires at orientation. To waive any coverage, employees should sign either a hard copy of the waiver or electronically using credible software that can track the interaction.
  2. “Compliant benefits” means “offering and providing minimal essential coverage as well as a minimum value plan.” Be aware that alternative, low-cost options are available that significantly reduce the cost and risk of third-party coverage or self-insured plans.
  3. Have a consistent system in place to identify full- and part-time employees. Establish a firm policy and train managers to act in accordance with that policy. Efforts to reduce employer costs by not assigning the best employees or offering “short hours” is counter-productive and often leads to penalties and larger costs in the long run.
  4. Work with your third-party administrator or provider to ensure the right information is properly stored and transmitted. Carefully choose vendors and provide complete reporting packages instead of a la carte selections that leave the employer vulnerable to penalties. It’s important that work papers and determination forms and processes are well documented.
  5. If a business receives notice from the IRS, it is imperative to address the situation immediately.

StarMed Benefits is a third-party administrator of employee-based PPACA compliant, self-funded ERISA medical benefits. No insurance and no insurance coverage are available from StarMed Benefits or its affiliates. Larry Long, principal at StarMed Benefits, has provided solutions to help employers with the Patient Protection Affordable Care Act  (PPACA) since the law was enacted in 2010.