ACA Reporting Requirements & Penalties  

The ACA requires Applicable Large Employers (ALEs) to offer the right type of health coverage at the right cost to their full-time employees (and dependents) or pay a penalty. This is commonly  known as the “employer shared responsibility” or “pay or play” rules.

Updated Oct 1, 2024

ACA Reporting Requirements 2024

Employers Must:

  1. Offer full-time workers medical coverage that is compliant with the Affordable Care Act for employers with 50 or more full-time employees; or pay a penalty.
    • Minimum Essential Coverage (MEC)
    • Minimum Value (MV): the plan must pay at least 60% of the benefits cost
    • Affordability: A plan is considered affordable if the employee’s required contribution does not exceed 9.83% (this amount is adjusted annually based on the federal poverty line %).
  2. Furnish Form 1095B or 1095C to full-time employees by March 3, 2025
  3. File the information returns with the IRS by March 31, 2025
  4. For employers offering self funded health plans with less than 50 full-time employees – furnish and file Form 1095B.

The Quick Takeaway Regarding Penalties

An ALE will face a penalty if one or more full-time employees obtain a subsidy through an Exchange. An individual may be eligible for a subsidy either because the ALE does not offer coverage, or offers coverage that is “unaffordable” or does not provide “minimum value.”

Penalty for ALEs Not Offering Coverage—The 4980H(a) Penalty

Under Section 4980H(a), a penalty of $2,970 (for 2024) per full-time employee minus the first 30 will be incurred if the employer fails to offer minimum essential coverage to 95% of its full-time employees and their dependents, AND any of the ALEs full-time employees receives a subsidy on the Exchange.

Under Section 4980H(a), the MONTHLY penalty assessed on ALEs that do not offer this coverage for 2024:

Total full-time employees – first 30 full-time employees x $247.50

For example, if an employer with 100 employees does not offer health insurance to its full-time employees and their dependents, and if at least one full-time employee buys tax-subsidized health insurance through the marketplace exchange for that month, the employer’s penalty will be $16,800.00 (100 – 30 × $247.50). Only full-time employees, not full-time equivalents, are counted for purposes of calculating the penalty.

Penalty for ALEs Offering Coverage—The 4980H(b) Penalty

ALEs that do offer coverage to substantially all full-time employees (and dependents) may still be subject to penalties if at least one full-time employee obtains a subsidy through an Exchange because:

  • The ALE did not offer coverage to all full-time employees; or
  • The ALE’s coverage is unaffordable or does not provide minimum value.

Under Section 4980H(b), the monthly penalty assessed on an ALE for each full-time employee who receives a subsidy is $371.67 for any applicable month. However, the total penalty for an ALE would be limited to the Section 4980H(a) penalty amount. The $4,460 penalty amount is indexed by the premium adjustment percentage for the calendar year.

Enforcement Procedures

The general procedures the IRS uses to propose and assess the employer shared responsibility penalties are described in Letter 226-J. The IRS will issue Letter 226-J to an ALE if it determines that, for at least one month in the year, one or more of the ALE’s full-time employees was enrolled in a qualified health plan for which a premium tax credit was allowed (and the ALE did not qualify for an affordability safe harbor or other relief for the employee).