Employer Mandate Noncompliance Penalties

89 November 17, 2023
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The IRS can impose a penalty under two circumstances as follows:

  1. The ALE fails to provide MEC to “substantially all” of its FT employees + their dependent children during a month. “Substantially all” = all but the greater of 5% or 5 FT employees.
    1. This penalty for calendar year 2023 is $2,880/year for all employees, minus the first
      30 employees. It is assigned on a monthly basis of 1/12th of $2,880, or $240.00/month per employee — minus the first 30.
    2. This penalty for calendar year 2024 is $2,970/year for all employees, minus the first
      30 employees. It is assigned on a monthly basis of 1/12th of $2,970, or $247.50/month per employee — minus the first 30.
  2. The ALE fails to offer affordable, Minimum Value coverage.
    1. This penalty for calendar year 2023 is $4,320/year for each employee in receipt of a Premium Tax Credit (PTC) subsidy from the exchange. It is not applied to all employees in the organization; it is only assessed per employee receiving a PTC. Like penalty A, it is assigned on a monthly basis of 1/12th of $4,320, or $360.00/month.
    2. This penalty for calendar year 2024 is $4,460/year for each employee in receipt of a Premium Tax Credit (PTC) subsidy from the exchange. It is not applied to all employees in the organization; it is only assessed per employee receiving a PTC. Like Penalty A, it is assigned on a monthly basis of 1/12th of $4,460, or $371.67/month.

ALEs can only be penalized for failing to comply with the employer mandate if a full-time employee who is eligible for benefits did not receive an offer of required coverage and receives a Premium Tax Credit (PTC) from the state exchange to pay for qualified, ACA-compliant individual or family coverage.

Either Penalty A or Penalty B may apply in a given month, but not both. Penalty B cannot exceed the amount of Penalty A, ensuring that an ALE that offers MEC but does not meet affordability or minimum value criteria never pays more than it would have if it had not offered MEC at all.