Tips for Fighting the Employer Shared Responsibility Payment Battle With the IRS

By Lucas W. Murray, Esq., and Andrew J. Byler, Esq.
Monday, May 13, 2019

The IRS continues to assess substantial “pay or play” penalties to employers for not complying with the coverage mandates of the Affordable Care Act (“ACA”).

In 2014, the ACA implemented the Employer Shared Responsibility or “pay-or-play” rules. Under Internal Revenue Code § 4980(H) the IRS may assess an Employer Shared Responsibility Payment (“ESRP”) to an applicable large employer if at least one employee received a premium tax credit and the employer:

1. failed to offer, minimum essential coverage, to substantially all full time employees (referred to as the 4980(H)(a) or “no offer” penalty), or

2. The coverage offered was either not affordable or did not provide minimum value (referred to as the 4980(H)(b) or the “affordability” penalty).

The IRS is currently sending out ESRP notices for tax year 2016. The notice comes on Letter 226J and provides a calculation of the proposed penalty and the basis for the penalty. Attached to the letter is Form 14765, which shows employees who received a premium tax credit and for whom the employer is being assessed a penalty.


Andrew J. Byler, Esq.

Lucas W. Murray, Esq.

After receiving the letter it is important for the employer to review the Form 14765 and determine any potential corrections to the form that would reduce the penalty. Any documentation regarding waivers of coverage, offers of coverage, affordability, or minimum value will help to support an employer’s claim that the IRS should reduce the penalty. It is our experience in responding to the IRS that the IRS is receptive to detailed responses either agreeing or disagreeing with all or part of the ESRP that attach written justification supporting that position. Further, employers will want to recommend revisions to the Form 14765 that further support the reduction in penalty.


NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.

Lucas W. Murray and Andrew J. Byler are attorneys with the law firm of Krugliak, Wilkins, Griffiths & Dougherty Co., L.P.A. in Canton, Ohio.