The Affordable Care Act (ACA) is a healthcare reform law aimed at increasing the affordability and accessibility of healthcare for millions of Americans who were previously uninsured or had limited coverage. There were several key provisions, such as the individual mandate that required most individuals to have health insurance and the Health Insurance Marketplace, which created an exchange for individuals and small businesses to purchase health insurance plans. Additionally, the ACA put in place the employer mandate and reporting requirements, which requires employers with 50 or more full-time equivalent employees to offer affordable health insurance coverage and to provide annual reports to the IRS and their employees that information about the coverage offered. There are ACA penalties imposed on employers who fail to meet the requirements to ensure employers comply. Most recently, the IRS revised ACA employer penalties. In this guide, we’ll walk through the ACA employer penalty for 2024 and what employers could expect if they fail to comply.
How Are the ACA Penalties Increasing in 2024?
The IRS released a statement that outlines the ACA employer mandate penalties for 2024 that explains the increases in the penalties for noncompliance. The penalty increases apply to employers who are subject to the employer mandate, which is those with 50 or more full-time equivalent employees.
These employers are categorized as Applicable Large Employers (ALEs), and the ACA employer penalties are issued to employers who fail to offer minimum essential coverage to at least 95 percent of their full-time employees and their dependents or offer coverage that is not affordable or fails to provide minimum value. These penalties are triggered when an employee purchases coverage through the marketplace. When an employee purchases health insurance coverage through the marketplace and receives subsidized coverage through a premium tax credit, their employer might be required to pay a penalty.
What Are the Existing Penalties
Before dividing into the new ACA employer penalty for 2024, it’s important to understand the existing penalties and where the changes occur. For 2023, there are two types of ACA penalties, including the 4980H(a) Penalty and 4980H(b) Penalty. Here’s how each penalty breaks down:
- 4980H(a) Penalty: The 4980H(a) Penalty is issued to employers who fail to provide minimum essential coverage to at least 95 percent of their full-time employees and dependents. The penalty for noncompliance in 2023 is $2,880/year ($240/month) for each full-time employee.
- 4980H(b) Penalty: The 4980H(b) Penalty is issued to employers who fail to provide affordable health insurance coverage that meets the minimum value or if one or more employees purchase subsidized health insurance through the marketplace. The penalty for noncompliance is $4,320/year ($360/month) for each full-time employee who receives subsidized coverage through an exchange.
What Are the New Penalties?
The ACA employer penalties for 2024 still include the 4980H(a) and 4980H(b) penalties. However, the IRS increased the price of these penalties for noncompliance, which means employers who fail to provide affordable health insurance coverage will pay more. Below are the new penalties:
- 4980H(a) Penalty: For the 4980H(a) Penalty for employers who fail to provide minimum essential coverage to at least 95 percent of their full-time employees and their dependents, employers are subject to a penalty of $2,970/year ($247.50/month).
- 4980H(b) Penalty: For the 4980H(b) Penalty for employers who fail to provide affordable health insurance coverage that meets the minimum value, or for those with one or more employees purchasing subsidized health insurance coverage through the marketplace, employers are subject to a penalty of $4,460/year ($371.67/month).
2024 Penalties Explained
When it comes to ACA employer mandate penalties, the price increase for the 4980H(a) Penalty increased from $2,880/year ($240/month) to $2,970/year (247.50/month), while the 4980H(b) Penalty increased from $4,320/year ($360/month) to $4,460/year ($371.67/month).
To remain compliant, employers need to meet the affordability threshold, which is used to determine whether the health insurance coverage they offer their employees is considered affordable. For 2023, the affordability threshold is 9.12 percent, down from 9.61 percent in 2022. It calculates the amount of household income eligible for individuals to contribute to the cost of their health insurance coverage. However, the IRS has not issued the affordability threshold for 2024.
Employer Requirements and Compliance
In order to remain compliant with federal and state ACA reporting compliance, employers deemed ALEs with 50 or more full-time equivalent employers need to provide health insurance coverage to at least 95 percent of their full-time employees and ensure the health insurance coverage meets the affordability threshold.
If an employer’s employee purchases subsidized health insurance coverage through the marketplace, the health insurance coverage fails to meet the minimum value, or if health insurance coverage isn’t offered to at least 95 percent of full-time employees, employers will be subject to the new ACA employer penalties for 2024.
Seeking Support for Compliance From Experian Employer Services
You must comply with ACA employer requirements if you’re an employer with 50 or more full-time equivalent employees. Of the ACA requirements, abiding by the employer mandate, and ensuring you meet the employer reporting requirements and deadlines, are essential. Working with an ACA reporting service like Experian Employer Services can help ensure you remain compliant throughout the entire ACA process.
With ACA reporting software, you can easily complete 1095-B and C forms electronically or via print and mail to meet deadlines. At Experian Employer Services, our solutions can ensure timely delivery for employees ahead of tax season, compliance with the latest and ever-changing government statutes, and compliance with state-specific ACA reporting requirements. Working with the right partner ensures compliance to avoid the ACA employer penalty for 2024. It can save time and increase efficiency to allow your HR and payroll teams to focus on other areas of your business.
The Affordable Care Act (ACA) is a healthcare reform law aimed at increasing the affordability and accessibility of healthcare for millions of Americans who were previously uninsured or had limited coverage. There were several key provisions, such as the individual mandate that required most individuals to have health insurance and the Health Insurance Marketplace, which created an exchange for individuals and small businesses to purchase health insurance plans.
Additionally, the ACA put in place the employer mandate and reporting requirements, which requires employers with 50 or more full-time equivalent employees to offer affordable health insurance coverage and to provide annual reports to the IRS and their employees that information about the coverage offered. There are ACA penalties imposed on employers who fail to meet the requirements to ensure employers comply. Most recently, the IRS revised ACA employers’ penalties. In this guide, we’ll walk through the ACA employer penalty for 2024 and what employers could expect if they fail to comply.
How Are the ACA Penalties Increasing in 2024?
The IRS released a statement that outlines the ACA employer mandate penalties for 2024 that explains the increases in the penalties for noncompliance. The penalty increases apply to employers who are subject to the employer mandate, which is those with 50 or more full-time equivalent employees.
These employers are categorized as Applicable Large Employers (ALEs), and the ACA employer penalties are issued to employers who fail to offer minimum essential coverage to at least 95 percent of their full-time employees and their dependents or offer coverage that is not affordable or fails to provide minimum value. These penalties are triggered when an employee purchases coverage through the marketplace. When an employee purchases health insurance coverage through the marketplace and receives subsidized coverage through a premium tax credit, their employer might be required to pay a penalty.
What Are the Existing Penalties
Before dividing into the new ACA employer penalty for 2024, it’s important to understand the existing penalties and where the changes occur. For 2023, there are two types of ACA penalties, including the 4980H(a) Penalty and 4980H(b) Penalty. Here’s how each penalty breaks down:
- 4980H(a) Penalty: The 4980H(a) Penalty is issued to employers who fail to provide minimum essential coverage to at least 95 percent of their full-time employees and dependents. The penalty for noncompliance in 2023 is $2,880/year ($240/month) for each full-time employee.
- 4980H(b) Penalty: The 4980H(b) Penalty is issued to employers who fail to provide affordable health insurance coverage that meets the minimum value or if one or more employees purchase subsidized health insurance through the marketplace. The penalty for noncompliance is $4,320/year ($360/month) for each full-time employee who receives subsidized coverage through an exchange.
What Are the New Penalties?
The ACA employer penalties for 2024 still include the 4980H(a) and 4980H(b) penalties. However, the IRS increased the price of these penalties for noncompliance, which means employers who fail to provide affordable health insurance coverage will pay more. Below are the new penalties:
- 4980H(a) Penalty: For the 4980H(a) Penalty for employers who fail to provide minimum essential coverage to at least 95 percent of their full-time employees and their dependents, employers are subject to a penalty of $2,970/year ($247.50/month).
- 4980H(b) Penalty: For the 4980H(b) Penalty for employers who fail to provide affordable health insurance coverage that meets the minimum value, or for those with one or more employees purchasing subsidized health insurance coverage through the marketplace, employers are subject to a penalty of $4,460/year ($371.67/month).
2024 Penalties Explained
When it comes to ACA employer mandate penalties, the price increase for the 4980H(a) Penalty increased from $2,880/year ($240/month) to $2,970/year (247.50/month), while the 4980H(b) Penalty increased from $4,320/year ($360/month) to $4,460/year ($371.67/month).
To remain compliant, employers need to meet the affordability threshold, which is used to determine whether the health insurance coverage they offer their employees is considered affordable. For 2023, the affordability threshold is 9.12 percent, down from 9.61 percent in 2022. It calculates the amount of household income eligible for individuals to contribute to the cost of their health insurance coverage. However, the IRS has not issued the affordability threshold for 2024.
Employer Requirements and Compliance
In order to remain compliant with federal and state ACA reporting compliance, employers deemed ALEs with 50 or more full-time equivalent employers need to provide health insurance coverage to at least 95 percent of their full-time employees and ensure the health insurance coverage meets the affordability threshold.
If an employer’s employee purchases subsidized health insurance coverage through the marketplace, the health insurance coverage fails to meet the minimum value, or if health insurance coverage isn’t offered to at least 95 percent of full-time employees, employers will be subject to the new ACA employer penalties for 2024.
Seeking Support for Compliance From Experian Employer Services
You must comply with ACA employer requirements if you’re an employer with 50 or more full-time equivalent employees. Of the ACA requirements, abiding by the employer mandate, and ensuring you meet the employer reporting requirements and deadlines, are essential. Working with an ACA reporting service like Experian Employer Services can help ensure you remain compliant throughout the entire ACA process.
With ACA reporting software, you can easily complete 1095-B and C forms electronically or via print and mail to meet deadlines. At Experian Employer Services, our solutions can ensure timely delivery for employees ahead of tax season, compliance with the latest and ever-changing government statutes, and compliance with state-specific ACA reporting requirements. Working with the right partner ensures compliance to avoid the ACA employer penalty for 2024. It can save time and increase efficiency to allow your HR and payroll teams to focus on other areas of your business.