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Treasury Inspector General for Tax Administration

Press Release


April 10, 2017
TIGTA-2017-07
Contact: Karen Kraushaar, Director of Communications
Karen.Kraushaar@tigta.treas.gov
(202) 622-6500

Affordable Care Act: Assessment of Efforts to Implement the Employer Shared Responsibility Provision

WASHINGTON ó Some of the processes the Internal Revenue Service (IRS) uses to ensure compliance with the Employer Shared Responsibility Provision of the Affordable Care Act did not function as intended or have been delayed, not initiated, or canceled, according to an audit report published today by the Treasury Inspector General for Tax Administration (TIGTA).

The Affordable Care Actís Employer Shared Responsibility Provision requires employers with an average of 50 or more full-time employees to offer health insurance coverage to them and their dependents. Under the law, employers who do not offer health insurance coverage, offer health insurance coverage that does not meet minimum requirements or is not affordable, may be subject to an Employer Shared Responsibility Payment.

TIGTA initiated its review as part of its ongoing work to audit the IRSís implementation of key Affordable Care Act tax provisions. This audit assessed the status of the IRSís preparations for ensuring compliance with the Employer Shared Responsibility Provision and the related information reporting requirements.

TIGTA found that as of October 28, 2016, the IRS had processed 439,201 Forms 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and nearly 110 million Forms 1095-C, Employer-Provided Health Insurance Offer and Coverage. However, due to system errors, the IRS was unable to process paper information returns timely and accurately. As of the same date, almost five months after the May 31 filing deadline, the IRS estimated that more than 16,000 paper Forms 1094-C and 1.4 million paper Forms 1095-C had not been processed.

Also, TIGTA found that the criteria used to identify validation errors in the submissions did not always work as intended. For example, error codes were erroneously generated when no error condition existed, and error codes did not generate when an error condition occurred. Several of the error codes did not function as intended because the IRS did not sufficiently test its error code programming.

Finally, the development and implementation of key systems needed to identify noncompliant employers subject to an Employer Shared Responsibility Payment have been delayed, not initiated, or cancelled. As a result, the IRS is now having to develop automated tools outside of these key systems in an attempt to identify noncompliant employers and rely on other interim solutions to control and manage their compliance related activities.

ďInformation from the Forms 1094-C and 1095-C is needed by the IRS to verify the accuracy of reported health insurance offers of coverage and for calculating the Employer Shared Responsibility Payment. Thus, it is essential that this information is timely and accurately processed,Ē said J. Russell George, Treasury Inspector General for Tax Administration.

TIGTA made seven recommendations to the IRS to improve the processing of Forms 1094-C and 1095-C. IRS management agreed with six of the seven recommendations. The IRS did not agree it should establish a time frame for employers to correct errors identified on Forms 1094-C and 1095-C, but the IRS may reevaluate the need for additional written guidance in the future.

Read the report.

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Note: The difference between the date TIGTA issues an audit report to the Internal Revenue Service and the date TIGTA publicly releases the report is due to TIGTA's internal review process to ensure that public release is in compliance with Federal confidentiality laws.