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ACA Employer Mandate Penalties On the Rise


The penalties for not offering health insurance to your employees – a violation of the Affordable Care Act if you maintain 50 or more full time or full-time equivalent workers are set to rise again next year.


The IRS has increased the fines for employers that fail to provide health insurance for their workers under the ACA’s employer mandate, as well as for failing to provide coverage that is affordable or provide “minimum value.” The penalties will apply to plans that start on or after January 1, 2024.


The way most employers find out they may have violated the employer mandate is when they get a 226-J letter from the IRS, which would be prompted by one of their employees receiving a premium tax credit after purchasing coverage on a government or state-based exchange.


There are two different penalties for violations:


The A Penalty

This is levied on an applicable large employer (ALE) for failing to offer minimum essential coverage to 95% of full-time employees and if just one of those employees receives a subsidy when they buy insurance on a government run ACA marketplace or a state-based exchange. The new penalty amount is $2970 per employee, up $90 from 2023. This penalty can be especially damaging, while it is not assessed for the first 30 employees, it applies to all the employer’s full-time employees if triggered, meaning cost can quickly add up.


The B Penalty

This fine is levied if an ALE fails to offer coverage that is affordable and/or fails to provide minimum value, and just one full-time employee receives subsidized coverage through the Federal or State marketplace. The annual penalty for a type B infraction rises to $4,460 per employee in 2024, up $140 from 2023. Typically, this penalty is broken down into monthly increments depending on how long an employee receives subsidized coverage.


Affordability: Coverage is deemed unaffordable if an employer fails to offer at least one self-only health plan for which any employee’s share of the premium does not exceed 9.12% (the 2023 threshold) of their household income. The affordability threshold has not yet been announced for 2024.


Minimum Value: In order to provide minimum value, an employer sponsored plan must cover at least 60% of average cost and provide substantial coverage for impatient and physician services.


The Takeaway

While you no doubt already offer coverage to your employees if you’re an ALE, it’s important to pay attention to next year’s affordability threshold. Any downward change means you must recheck to ensure that at least one of your plans offers coverage deemed affordable to your lowest-paid employee.


Also, be especially mindful during the new employee onboarding to ensure they are properly identified and offered coverage. If the IRS suspects you are out of compliance, it will send you a 226-J letter. The 226-J letters are also sent to employers if they make mistakes on their Form 1095-C.


If you receive one of these letters, contact us for assistance. If you are unsure if your medical benefits satisfy the ACA requirements, call us today at 678.821.3508 for a FREE evaluation.

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