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Employers continue to receive nastygrams from the IRS threatening “Employer Shared Responsibility Payments” (ESRP). These penalties are assessed against an employer that doesn’t offer compliant, affordable group health coverage to a sufficient percentage of its employees when an employee who isn’t offered compliant, affordable coverage obtains tax-subsidized health coverage via the federal “marketplace.”

In our experience, and with just a few exceptions, the penalty notices are generated not because of an actual violation of the rules, but because of incomplete or incorrect reporting on IRS Forms 1094-C or 1095-C, which are the reporting forms the large employers use to report health coverage offered to employees.

Often an employer delegates responsibility for preparing the reporting forms to its payroll provider or a consulting firm. Employers should review these forms before they are filed. For example, does the form check the correct box indicating whether coverage was offered to employees? We have seen numerous ESRP penalties assessed based on forms stating that coverage was not offered when in fact the employer had offered coverage. Employers should look for other obvious errors such as inconsistent information, checkboxes not marked, blanks not filled in, etc.