ACA Penalty A and B Breakdown
All applicable large employers (ALEs) must comply with the Affordable Care Act (ACA), which requires employers to offer minimum essential coverage to all employees.
If an employer does not comply with this employee coverage requirement, it could lead to penalties for the employer and potentially an IRS audit.
Below is a breakdown of ACA penalties A and B and how they could affect your company.
Who is Considered a Large Employer?
First, who is considered a large employer?
Any company or organization with an average of at least 50 full-time employees or “full-time equivalents (FTEs)” is considered an applicable large employer.
*For the purposes of the ACA, a full-time employee is someone who works a minimum of 30 hours a week.
What Are ACA Benefits?
The ACA was created in 2010 to offer more affordable health benefits to a wider range of people. Any ACA-compliant benefit plan must cover these 10 essential health benefits:
- Ambulatory services
- Emergency services
- Hospitalization
- Pregnancy, maternity, and newborn care (before and after birth)
- Mental health and substance use disorder services
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventative and wellness services and chronic disease management
- Pediatric services
Additionally, ACA benefits cover birth control and breastfeeding support.
The Employer Mandate (Penalty A)
For 2024, the penalty is $2,970 annually per eligible employee who is not offered minimum essential coverage (MEC). This penalty is adjusted for inflation each year.
For 2025, the penalty is estimated to rise to $3,180.
The Employer Mandate (Penalty B)
Employers must offer a plan with minimum value (MV), defined as a plan that covers at least 60% of healthcare costs.
For 2024, the maximum contribution an employee can pay for coverage is 8.39% of their household income.
For 2025, this percentage may be adjusted, but 8.39% is the current figure for 2024.
If an employee receives coverage through the state exchange and qualifies for a premium subsidy, the penalty for non-compliance is $4,460 per employee for 2024.
For 2025, this penalty is projected to increase to $4,760.
The Individual Mandate
The individual mandate went away starting January 1st, 2019, for most Americans.
However, individuals in specific states that maintain the individual mandate, including the District of Columbia, Massachusetts, or New Jersey, will continue to be penalized according to the individual mandate.
These penalties can easily add up with over 100 employees eligible for health coverage. At SBMA, we want to help you avoid any potential penalties for lack of proper insurance.
Contact an SBMA representative for more information regarding your employer benefit needs.