EASTHAMPTON — On Nicole LaChapelle’s first day as mayor Tuesday, she experienced her first financial headache: a letter from the Internal Revenue Service stating the city owed a half million dollars dating back to tax year 2015.
The charge relates to health insurance for city employees. LaChapelle said Thursday the city has followed the proper procedures regarding insurance and has sent a response to the IRS, disagreeing with the proposed payment.
“I know that the city offered insurance to everyone,” LaChapelle said.
The letter, dated Dec. 20, to Easthampton’s treasurer states that the city owes an “employer shared responsibility payment” of $551,893. LaChapelle said it concerns tax year 2015.
According to the letter, one employee eligible for the city’s health insurance received a premium tax credit on his individual income tax returns.
As part of the Affordable Care Act, the tax credit covers premiums for health insurance. Those who are eligible for the credit are not able to get affordable coverage offered through their employer.
The IRS said the payment the city is facing is generally owed if a minimum essential coverage was not offered to at least 70 percent of full-time employees, and at least one employee has been allowed the premium tax credit; or the minimum coverage was offered to at least 70 percent of the full-time employees, but one employee was allowed the tax credit because coverage was unaffordable.
At $68,986 per month, the payments added up to more than half a million dollars.
On Wednesday, LaChapelle told the City Council about the letter and said a response was being mailed to the IRS. She said within 30 days, the matter should be resolved without the city having to pay any fees.
“I have a big, fat reminder in my calendar to check on that letter,” LaChapelle said.
Former mayor Karen Cadieux said that she was never notified of the letter during her last few weeks in office.
“This is definitely new and unwarranted,” Cadieux said.
Caitlin Ashworth can be reached at cashworth@gazettenet.com.