Strategic Victory: The Wilson Firm's Expert Negotiation Reduces ESRP Penalty from $465,000 to $9,000

Understanding ESRP Penalties Under the Affordable Care Act

The Employer Shared Responsibility Payment, or ESRP, is a penalty imposed under the Affordable Care Act on certain employers that fail to meet health coverage requirements for their employees. These penalties are governed by Internal Revenue Code Section 4980H.

There are two primary types of ESRP penalties:

• Section 4980H(a) penalties, which may apply if an employer fails to offer minimum essential coverage to a sufficient percentage of employees
• Section 4980H(b) penalties, which may apply when coverage is offered but does not meet affordability or minimum value standards for certain employees

IRS ESRP notices often involve significant proposed liabilities, making it critical for businesses to carefully review their compliance and supporting documentation.

$465,000 Proposed ESRP Penalty Assessment Case Overview

Our firm represented a company facing a substantial Employer Shared Responsibility Payment assessment from the IRS.

At the time representation began:

• The IRS proposed an ESRP penalty of $465,000
• The assessment was based on the IRS interpretation of the company’s health coverage compliance
• The company sought to challenge the penalty and demonstrate compliance with ACA requirements
• Without intervention, the business faced the full amount of the proposed liability

Challenging Section 4980H Penalty Determinations

Our team conducted a detailed review of the company’s health coverage program and the IRS determination. The strategy focused on identifying whether the correct ESRP penalty framework had been applied.

Key steps included:

• Analyzing the employer’s health plan to confirm compliance with minimum essential coverage and minimum value standards
• Demonstrating that the requirements for Section 4980H(a) penalties were not met
• Establishing that, at most, the Section 4980H(b) penalty structure applied
• Presenting documentation and legal arguments to the IRS to support a reduced assessment
• Engaging in direct negotiations with the IRS to resolve the penalty efficiently

This approach allowed for a focused resolution without the need for prolonged or complex litigation.

ESRP Penalty Reduced to $9,000

After reviewing the documentation and legal arguments presented, the IRS significantly reduced the proposed penalty.

Final Outcome:

• Original ESRP Penalty: $465,000
• Final ESRP Liability: $9,000
• Total Reduction: $456,000

The resolution substantially reduced the company’s financial exposure and resolved the IRS penalty assessment.

Why ESRP Penalty Reviews Are Critical for Employers

ESRP penalties can create significant financial risk for businesses, especially when the IRS relies on incomplete or incorrect assumptions about employer health coverage.

A detailed review of plan design, employee eligibility, and compliance documentation may reveal that the assessment does not accurately reflect the employer’s obligations under the Affordable Care Act.

Each case depends on the specific facts involved, but early analysis and strategic response can play a key role in reducing or eliminating ESRP penalties.

Need Help Responding to an ESRP Penalty or ACA Compliance Issue?

If your business has received notice of an Employer Shared Responsibility Payment or other IRS penalty related to employee health coverage, experienced legal guidance can help evaluate the assessment and determine the best strategy for resolution.

Contact The Wilson Firm to discuss your situation and explore your next steps.