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Hey, Section 1411 Notice, Where Have You Been?

November 15, 2023

The Affordable Care Act (ACA) has many requirements, and the mandate that health insurance Marketplaces (“Exchanges”) send a notice to employers regarding employees who purchased subsidized coverage through a Marketplace is commonly overlooked. These notices, referred to as “Section 1411 certifications” (because they’re outlined in Section 1411 of the ACA), are part of a process established by the Department of Health and Human Services (HHS) to verify that only eligible individuals receive health insurance subsidies. 

These certification notices should not be confused with “ACA Exchange Notices,” which simply require employers to provide an Exchange Notice to new hires within 14 days of their start date. There are no fines or penalties for failing to provide this type of notice, essentially rendering them optional for employers. On the other hand, the Section 1411 certifications that Marketplaces should be generating are theoretically mandatory. In practice, we are seeing that very few employers actually receive these notices.

According to Section 1411 of the ACA, the Marketplace must notify employers “within a reasonable timeframe” when a determination is made that one of their employees is eligible for subsidized coverage. This applies to both state-run and federally-facilitated Marketplaces. A Section 1411 certification, as per the final regulations, must: 

  • Identify the employee;
  • Provide that the employee has been determined to be eligible for a health insurance subsidy;
  • Indicate that if the employer has 50 or more full-time employees, the employer may be liable for a penalty under the employer-shared responsibility provisions (Internal Revenue Code Section 4980H); and
  • Describe the employer’s appeal rights.

HHS began issuing these certifications in batches in the spring of 2015. Since then, we have seen these notices trickle out, but not nearly enough have been generated considering the number of employees enrolled in subsidized exchange coverage. 

As the above list indicates, employers that do receive certifications are permitted to appeal a subsidy determination. Doing so, when appropriate, (1) helps ensure that employees are not mistakenly receiving subsidies that they may ultimately need to repay and (2) helps limit an Applicable Large Employer’s (ALE) potential liability for an employer shared responsibility penalty.

Whether it be a state-run Marketplace or a federal Exchange, the appeals process must: 

  • Allow employers at least 90 days from the date of the notice to request an appeal;
  • Allow employers to submit relevant information to support the appeal;
  • Not limit or interfere with an employer’s right to request an appeal;
  • Accept appeal requests made by telephone, by mail, via the Internet, or in person; and
  • Provide aid in making the appeal request if such aid is needed. 

ALEs need to know that while they may appeal a subsidy determination to help ensure that employees are not mistakenly receiving subsidies, they are not required to do so to preserve their rights to appeal an IRS assessment of a penalty tax. Employers that choose not to respond to Section 1411 certifications and subsequently receive an employer mandate penalty from the IRS can still contest the penalty according to the response process outlined in the IRS proposed penalty letter (typically, a Letter 226J). 

Given how infrequently these Section 1411 certifications are currently issued, employers receiving them may need to be made aware and prepared. So, how does an ALE best prepare for future potential 1411 certification issues? We recommend that ALEs:

  • Be aware that they could receive Section 1411 certifications in the future; 
  • Charge a representative within the organization with the responsibility of reviewing and responding to the certifications within 90 days of receipt or another timeframe provided in the certification (or by coordinating with a benefits consultant to prepare the response);
  • Develop a process for reviewing and appealing incorrect certifications;
  • Establish a retention policy for the certifications and any appeals; and
  • Determine whether to allow employees to enroll in employer coverage outside of the employer’s open enrollment period if an employee is determined to be ineligible for Marketplace subsidies because of an employer appeal decision.

This seems like a lot of work; this is where MZQ Consulting can assist. If your organization receives a Section 1411 certification, we can advise on the most prudent next steps to help mitigate the potential for an employer shared responsibility payment.

Should you have any questions or concerns, please get in touch with MZQ Consulting.