IRS Releases 2024 ACA Employer Mandate Penalties
Under the ACA, employers with 50 or more full-time equivalent employees (ALEs) must offer affordable and adequate health coverage to their full-time employees or be subject to potential penalties. These penalty amounts are indexed each year.
2024 (a) Penalty
Under the ACA, ALEs may be subject to an employer mandate penalty for failing to offer minimum essential coverage (MEC) to 95% of full-time employees and their dependents. This requirement comes from IRC Section 4980H(a) and is more widely referred to as the (a) penalty or the “sledgehammer” penalty.
For calendar year 2024, the (a) penalty is $2790. This represents a $90 increase from 2023.
The penalty is triggered if a full-time employee purchases coverage through the Marketplace and receives subsidized coverage by way of a premium tax credit. The (a) penalty applies to all the employer’s full-time employees (minus the first 30 employees) once triggered.
2024 (b) Penalty
If an ALE fails to offer coverage that is affordable and provides minimum value, and a full-time employee receives subsidized coverage through the Marketplace, then the (b) penalty is triggered. This requirement comes from IRC Section 4980H(b). Unlike the (a) penalty, the (b) penalty is only imposed with respect to each full-time employee receiving subsidized Marketplace coverage for the month.
For calendar year 2024, the (b) penalty is $4460. This represents a $140 increase from 2023.
Coverage meets the minimum value threshold if it the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of those costs. Coverage is deemed affordable if the employee’s required contribution for self-only coverage does not exceed an affordability percentage annually set by the IRS. In 2023, the affordability percentage is 9.12%. The 2024 affordability percentage amounts have not yet been announced by the IRS.