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MSP #14: AFFORDABLE CARE ACT (ACA) – BUSINESS

The IRS Faces Challenges in Implementing the Employer Provisions of the ACA While Protecting Taxpayer Rights and Minimizing Burden

TAS Recommendations and IRS Responses

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1.

TAS RECOMMENDATION #14-1

Provide additional guidance to employers and tax practitioners on how to calculate the number of FTEs for purposes of meeting the MEC requirements.

IRS RESPONSE TO RECOMMENDATION: The ALE Information Center provides detailed information for employers for meeting the requirements of minimum essential coverage. This page provides a multitude of information that is useful to employers, including How to Determine if you are an ALE, Resources for Applicable Large Employers, and Outreach Materials. In addition, updated educational webinars on IRC §4980H and IRC §6056 were completed in late March and early April. The IRS will continue to monitor available information and update it as needed.

CORRECTIVE ACTION: N/A

TAS RESPONSE: While the information the IRS puts out on the ALE Information Center or other web pages may be helpful to employers, it does not have the same effect as that of formal IRS guidance.  With formal guidance, employers and other stakeholders have the opportunity to comment, and employers may rely on such guidance (unlike with FAQs posted on a website).

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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2.

TAS RECOMMENDATION #14-2

Publish regulations explaining how the IRC § 4980D excise tax may apply to certain flexible spending accounts and health reimbursement arrangements.

IRS RESPONSE TO RECOMMENDATION: The Department of Labor (DOL) is the responsible entity to define a group health plan. Once defined, failure to meet the requirements of chapter 100 (relating to group health plan requirements) results in an excise tax. Generally these are Employee Retirement Income Security Act (ERISA) requirements overseen by the DOL, under CFR 29 and the excise tax on failure to meet those requirements is administered by IRS under title 26.

DOL is responsible for coordinating with Health and Human Services (HHS) to develop any new guidance and/or regulations. The IRS imposes the IRC §4980D excise tax when notified by DOL of its applicability and issues the guidance provided by DOL. Treasury Notice 2015-17 provides guidance on the subject.

Because DOL, HHS and IRS have been consistent in guidance on IRC §4980D and no statutory changes have been made requiring DOL or IRS to issue additional regulations, we disagree that additional regulation are required to administer IRC §4980D.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS recognizes that this area of law is complex, with several agencies having responsibility for administering certain provisions of the ACA.  But that does not absolve the IRS of responsibility. Rather, the IRS should coordinate with DOL and HHS to ensure there is sufficient guidance interpreting certain provisions, such as the application of the IRC § 4980 excise tax.  Allowing uncertainty to linger about the application of this excise tax is not a sign of good tax administration. If issuing regulations under IRC § 4980D is not practical, then perhaps the IRS can provide informal guidance such as Frequently Asked Questions on the IRS website.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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3.

TAS RECOMMENDATION #14-3

Establish a Rapid Response team to assist front-line IRS employees with issues, problems, or questions from employers or tax practitioners.

IRS RESPONSE TO RECOMMENDATION: The IRS disagrees that a rapid response team is required based on available training and resources. The devotion of scarce personnel to duplicate existing reference material is not an action we believe is required, nor prudent in the current budget situation.  There is information on the ACA webpage along with ongoing outreach and education. Guidance alerts are utilized to direct IRS phone assistors in referring taxpayers to the ACA website for information and published regulations. The Tax Professional and Legal Guidance link located on the ACA webpage is also a primary source of information. The IRS will be monitoring all incoming inquires as well as any outreach in considering whether to expand the IRS web resources and Frequently Asked Questions (FAQ’s) which will enable more self help in lieu of staffing a team to handle individual questions.

CORRECTIVE ACTION: N/A

TAS RESPONSE: The National Taxpayer Advocate does not discourage the IRS from expanding the use of the website to post FAQs and other relevant information.  However, TAS believes the IRS should not turn its back on taxpayers who wish to speak to live assistors.  The IRS should offer taxpayers multiple channels to inquire about ACA-related questions.  By saying it will not form a rapid response team composed of a small network of subject matter experts to address emerging issues and concerns, the IRS is choosing a “static” model of training, as opposed to an interactive, experience-driven model.  A static approach creates re-work, and can negatively impact taxpayer satisfaction. The IRS is able to establish a rapid response team without expending additional resources by leveraging its existing network of specially- trained employees with expertise on ACA provisions.  TAS used this approach to form a rapid response team, where ACA subject matter experts (spanning both individual and business related ACA issues) meet regularly to discuss emerging issues and provide clarification as necessary.  Such an approach would allow the IRS to identify areas where stakeholders are confused, and give the IRS an opportunity to craft better communication regarding these issues in real time, while it develops more formal and extensive guidance to be released later.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Not Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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4.

TAS RECOMMENDATION #14-4

Provide employees in its newly-established ACA Business Exam unit with comprehensive and specialized training on the parts of ACA implementation that impact businesses, including training on concepts such as ALE, MEC, and ESRP.

IRS RESPONSE TO RECOMMENDATION: The actions suggested in this recommendation are already included in our IRC §4980H implementation plan as shared previously with the Taxpayer Advocate staff. The ACA Enterprise Integrated Program Plan and the SB/SE implementation action plan reflect Tier 3 (Functional) training for the unit that will be stood up to work IRC §4980H cases.  The training will be developed for delivery as the components of the infrastructure are developed and scheduled for deployment. Course development is scheduled to begin in September 2016 and training delivery will occur in November-December 2016.

CORRECTIVE ACTION: N/A

TAS RESPONSE: TAS is pleased that the IRS has taken actions to implement our recommendation.

ADOPTED, PARTIALLY ADOPTED or NOT ADOPTED: Adopted

OPEN or CLOSED: Closed

DUE DATE FOR ACTION (if left open): N/A

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