A recent federal court ruling has major implications for how the IRS enforces the Affordable Care Act (ACA)’s Employer Shared Responsibility Provisions (ESRP). Employers who have been assessed ESRP penalties under the ACA may want to take a closer look.
The ruling found that the IRS exceeded its authority by assessing ESRP penalties based on certifications that should have come directly from HHS and not from the IRS. The ACA does not permit HHS to transfer the authority to issue these certifications to the IRS.
The court also said that HHS’s past attempts at issuing these certifications were inadequate. As a result, the IRS’s Letter 226-J, which typically serves as a notice to employers of an ESRP penalty liability, was found to be unsupported in this case. The court ordered a refund of over $205,000 in ESRP penalties to the employer, though it denied a request for attorney’s fees.
If your health plan has been assessed an ESRP penalty without proper certification from HHS, this decision may be relevant to you. If so, please discuss with your legal counsel.
HHS has until late June to appeal this decision. We will keep you posted on any future developments.
Related Blogs
Compliance
PUBLISHED
May 30th, 2025
Health Plans Must Expand Coverage for Breast Cancer Screening for 2026
DeAnn Deck
Effective for plan years beginning after Dec. 30, 2025, group health plans and health insurance issuers must expand their first-dollar coverage for preventive care ...
Read More
Benefits+
PUBLISHED
May 29th, 2025
Federal Court Vacates PWFA Abortion Accommodation Mandate
DeAnn Deck
On May 21, 2025, the U.S. District Court for the Western District of Louisiana vacated the U.S. Equal Employment Opportunity Commission’s (EEOC) requirement that ...
Read More
Compensation and Total Rewards
PUBLISHED
May 20th, 2025
How Employers Are Shaping Sustainable Compensation Strategies in 2025
Julie Bingham
After years of pressure on compensation programs due to a highly competitive labor market, changing employee priorities, and rising inflation and cost of living, ...
Read More
Benefits+
PUBLISHED
May 16th, 2025
HSA/HDHP Limits Will Increase for 2026
DeAnn Deck
On May 1, 2025, the IRS released Revenue Procedure 2025-19 to provide the inflation-adjusted limits for health savings accounts (HSAs) and high deductible health ...
Read More
Benefits+
PUBLISHED
May 15th, 2025
New Executive Order Aims to Reduce Drug Costs by Aligning with Global Prices
DeAnn Deck
On May 12, 2025, President Donald Trump issued an executive order (EO) that aims to bring the prices Americans pay for prescription drugs in ...
Read More
Compliance
PUBLISHED
May 15th, 2025
Form 5500 Deadline is July 31
DeAnn Deck
Each year, employers that are subject to the Employee Retirement Income Security Act of 1974 (ERISA) must electronically file an annual report (Form 5500) ...
Read More