TaxBandits Knowledge Base

What are the Penalties for failing to meet the ACA Employer Mandate?

The penalties are levied based on the information provided by employers on their 1094-C and 1095-C forms. It is important to note that only the IRS can levy penalties, these are simply the penalty amounts provided by the IRS. 

Penalty under Section 4980H (a)

This penalty will be levied on an employer if,

• Minimum Essential Coverage (MEC) is not offered to at least 95% of their full-time employees and
• Any full-time employee receives a Premium Tax Credit (PTC) through the marketplace.

Penalty Rate for the tax year 2024 is $2,970. The penalty is calculated based on the total number of full-time employees minus the first 30 full-time employees. This calculation includes full-time employees who have minimum essential coverage under the employer’s plan or from other vendors.

Example: 

If you are an ALE that has 55 full-time employees and any one of your full-time employees receives the premium tax credit in the year 2023, the IRS could penalize you (the employer)  as much as $68,750 ((55-30)*2750). 

Penalty under Section 4980H (b)

This penalty will be imposed on an employer if,

• The employer offers coverage to their full-time employees, but the offer is “NOT Affordable” and doesn’t provide the “Minimum Value” (MV) or
• If the employee receives a Premium Tax Credit (PTC) for any month.

The penalty rate for the tax year 2024 is $4,460. 

Example:

If 2 employees received the premium tax credit in the year 2023, the penalty levied by the IRS could be as much as $8240 ($4120*2).