What are the penalties Applicable Large Employers face under the Affordable Care Act?
676 views | Last modified 11/12/2024 8:18:38 AM EST | Added by ACAwise Team

There are two provisions of the Affordable Care Act that apply specifically to Applicable Large Employers (an employer with 50 or more full-time or FTE employees). When they fail to meet the two ACA provisions below, the ALE will be liable for the penalties from the IRS under the ACA.

• The employer shared responsibility provisions; and
• The employer information reporting provisions

 To know if you’re an Applicable Large Employer (ALE) subject to the above ACA provisions, you can use our ALE Status Calculator. This helps you to find the number of full-time equivalent employees you have.

ALE ACA Requirements:
If you are an ALE, 

1. Under the ACA employer shared responsibility provisions, you must either offer minimum essential coverage that is affordable and that provides minimum value to at least 95% of full-time employees and their dependents. If you fail to provide this, you will be facing ACA penalties from the IRS under Section 4980H(a) &(b).
2. Under the ACA employer information reporting provision, you must file the forms with correct information on time with the IRS and furnish the copies on time to their employees. If you fail to comply with this, you may be subject to ACA penalties from the IRS under section 6056. 

Penalty Under Section 4980H (a)

This penalty is imposed on ALEs who fail to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time employees and if any employee receives a Premium Tax Credit (PTC) through the marketplace.

ALEs subject to this penalty will pay $2,970 for the tax year 2024 for each full-time employee minus the first 30 full-time employees from the calculation. 

For example, if you are an ALE with 55 full-time employees and any one of your full-time employees receives the premium tax credit from the marketplace, the IRS will penalize you $64,250 ((55-30)*$2,750).

Penalty Under Section 4980H (b)

A lesser penalty applies to ALEs who fail to offer a health plan that does not meet the affordability standards and doesn’t provide the Minimum Value (MV) or if the employee receives Premium Tax Credit (PTC) for the month.

ALEs subject to this penalty will pay $4,460 for the tax year 2024 for each full-time employee minus the first 30 full-time employees from the calculation. 

For example, if 2 employees received the premium tax credit from the marketplace, the IRS will penalize you $7,720  (2*4,120).

Non-filing Penalty

This penalty applies to ALEs who fail to comply or fail to document their compliance properly.

ALEs who fail to furnish accurate1095-C and 1094-B forms with an employee will be penalized up to $280 per form. A separate $280 per-form penalty may be imposed for failing to file an accurate form with the IRS, for a potential $560 penalty per employee.

If you are worried about a potential penalty for not offering minimum essential coverage to your full-time equivalent employees and the offered coverage is unaffordable, you can use our ACA Penalty Calculator that helps you to instantly find out what your ACA penalty could be from the IRS.