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Three Facts Every Employer Should Know about Code Section 4980H Penalties

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  1. Despite many legal challenges, the Affordable Care Act remains the law of the land.  In particular, Code Section 4980H imposes penalties on large employers for failure to offer minimum essential coverage to 95% or more of their full-time employees (and dependents) or to provide affordable, minimum value health insurance.
  1. The IRS continues to enforce Code Section 4980H penalties vigorously and takes the position that there is no statute of limitations for failure to comply.  Penalties can be significant and may extend across multiple calendar years. 
  1. A recent decision from the Court of Appeals for the D.C. Circuit confirms that employers may not sue to enjoin enforcement of Code Section 4980H penalties.  Instead, employers may challenge an assessment with the IRS directly or pay the tax and seek judicial review via a suit for refund.

If you need help determining whether you are an “applicable large employer” subject to these rules or estimating the extent of potential penalty exposure, our Employer Shared Responsibility Penalty Checklist for Employers may be a useful starting point.  Copies are available on request.