Trade Preference Extension Act of 2015 Doubles Obamacare Penalties Overnight

Four days after King v. Burwell sealed the deal for Applicable Large Employers in 2015, President Obama signed into law the Trade Preferences Extension Act of 2015. With its passing, Affordable Care Act fiscal penalties doubled overnight.

Where were we?

Beyond the widely known sledge and tack-hammer penalties of the Affordable Care Act (unaffected by the new Act) are a series of general reporting penalties linked to administrative filing errors, delinquency, and outright negligence. Of note, the March CBO Revenue and Spending report for the ACA listed these general penalties as Obamacare’s largest funding source. With this recent act, those projections make a lot more sense.

The increased penalty amounts are as follows:

General Penalty Amount: Increased from $100 to $250 with an annual maximum cap increase from $1.5M to $3M. For those employers with up to $5M annual gross receipts, the max annual cap rose from $500,000 to $1M.

Violations corrected within 30 days: Increased from $30 to $50 for each return with an annual maximum cap increase from $250,000 to $500,000. For those employers with up to $5M annual gross receipts, the max annual cap rose from $75,000 to $175,000.

Violations corrected before August 1: Increased from $60 to $100 for each return with an annual maximum cap increase from $500,000 to $1.5M. For those employers with up to $5M annual gross receipts, the max annual cap rose from $200,000 to $500,000.

Violations due to intentional disregard: Increased from $250 to $500 per return, or if greater, 10% of the total amount of items required to be reported correctly. There is no annual maximum.

So, for example, if an ALE with 100 full-time employees made zero effort to comply with the regulation or reporting requirements, it is looking at a minimum $50,000 fine out the gate. That’s before factoring any potential impact of the sledge or tack-hammer penalties.

While the IRS has provided room for short-term relief from these penalties in year one, that relief does not extend to those who fail to demonstrate a “good faith effort” to comply with the ACA reporting regulations, or fail to provide information returns to employees or file on time with the IRS.

Related Blog: Pros and Cons to In-House Affordable Care Act Compliance

Furthermore, the IRS has not provided any amplifying guidance of what constitutes a “good faith effort.” It’s safe to assume that when the time comes, they’ll be judge and jury.

Complying with the Affordable Care Act in 2015 demands robust administrative tracking of hours, coverage offerings and waivers, and, in some cases, dependent eligibility information. For more information on the data required for, see our blog on Obamacare Data Collection, or download our ACA reporting white paper.