IRS Resumes 226-J Enforcement: What 0Employers Need to Know for 2024

Written By Marsha Marrullier

If your organization offers group health coverage and you've received an IRS Letter 226-J, you're not alone — and it doesn't automatically mean you owe a penalty.

Letter 226-J proposes what the IRS calls an Employer Shared Responsibility Payment, or ESRP — better known as the ACA "pay or play" penalty. It's based on the IRS's review of your Forms 1094-C and 1095-C. Sometimes the proposed penalty is accurate. Just as often, it stems from a filing error — and a timely, well-documented response can reduce or eliminate it entirely.

This past July, the IRS began issuing 226-J letters for the 2024 calendar year to employers whose ACA filings suggest potential non-compliance.

What's Actually in the Letter

Each Letter 226-J includes an ESRP Summary Table showing how the IRS arrived at its number. It will point to one of two issues:

  • Penalty A — coverage wasn't offered to at least 95% of ACA full-time employees.

  • Penalty B — coverage was offered, but it wasn't affordable or didn't meet minimum value.

You'll also receive an Employer Premium Tax Credit (PTC) Listing. This shows which full-time employees received a premium tax credit through the ACA marketplace, matched against what your Form 1095-C said about their coverage offer.

What to Do First

Don't take the IRS's number at face value. Compare it against your original ACA filings, payroll records, and enrollment data. Mismatches between what was filed and what actually happened at the plan level are common — and they're often exactly why a penalty can be reduced or removed.

Watch the Clock

Every 226-J letter comes with a response deadline of at least 90 days from the letter date. You'll typically respond using Form 14764, along with documentation and, if needed, a written explanation. Missing that deadline means losing your right to appeal. There's no second chance once the window closes.

A Second Penalty Can Follow

Correcting your 1094-C or 1095-C filings in response to an IRS inquiry can trigger its own penalties, based on how many forms are corrected. For the 2024 filing year:

  • $330 per form for an inaccurate Form 1095-C furnished to an employee.

  • $330 per form for an inaccurate Form 1094-C/1095-C filed with the IRS.

A reasonable cause exception may offer relief here if you can show a legitimate basis for the original error.

What Employers Should Be Doing Now

  • Watch your mail for Letter 226-J and other ESRP-related IRS correspondence.

  • Keep Forms 1094-C and 1095-C, plus supporting records, for several years past filing.

  • Maintain complete records of coverage offers and enrollment elections — including waivers and declinations.

  • Keep current and past plan documents and Summary Plan Descriptions easy to find.

  • Preserve the affordability calculations behind your ACA compliance position.

  • Document how you classified employees (full-time, part-time, variable-hour) and why.

  • Be ready to back up any dispute with documentation — the burden of proof is on the employer.

  • Remember: the IRS has up to six years from the ACA reporting deadline to assess a penalty.

  • Loop in your benefits advisor early if you need to correct a 1094-C or 1095-C — getting the correction right matters as much as making it.

This article is provided for general informational purposes and does not constitute legal, tax, or accounting advice. Employers should consult qualified legal or tax counsel regarding their specific circumstances.

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Marsha Marrullier, REBC
Strategic Employee Benefits Advisor, ARCW Leavitt Insurance Group
Marsha-Marrullier@Leavitt.com | (754) 315-5211 | marshamarrullier.com

Marsha Marrullier

Marsha C. Marrullier, REBC

Senior Employee Benefits Advisor | ARCW Leavitt Insurance Group

Marsha C. Marrullier is one of the most seasoned employee benefits strategists in the country, bringing more than 30 years of consulting, underwriting, and plan design expertise to employers across Florida, Kentucky, and the Southeast United States.

 

In 1989, Marsha founded Corporate Benefits Network, Inc., a consultancy built on the principle that employers deserve more than annual renewals and reactive cost management. Over three decades, she grew the firm into a nationally respected practice serving businesses from 50 to 5,000 employees — helping CEOs, CFOs, Controllers, and HR Directors fundamentally restructure how they purchase, manage, and leverage their employee benefits programs. Corporate Benefits Network was ultimately acquired by ARCW Leavitt Insurance Group, the 17th largest independent P&C Insurance agency in the United States, where Marsha continues her practice today.

 

Marsha's technical foundation is rare in the consulting industry. She combines deep underwriting knowledge with financial modeling expertise, allowing her to evaluate self-funded and level-funded plan structures, captive arrangements, and stop-loss programs with the precision of an actuary and the perspective of a business advisor. Her PBM analysis and pharmacy cost containment strategies have produced significant savings for clients navigating one of healthcare's most complex and opaque markets.

 

Clients retain Marsha not to sell them a product, but to solve a problem: how to reduce healthcare spend without reducing the quality of care or the value of benefits to employees. Her approach is rigorous, data-driven, and unapologetically aligned with the financial interests of the employer and the health outcomes of their workforce.

 

A Registered Employee Benefits Consultant (REBC), Marsha is recognized throughout the industry for her integrity, her technical depth, and her ability to translate complex benefits strategy into clear, actionable financial decisions for executive leadership teams.

https://MarshaMarrullier.com
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