News + Insights

Effective:

Plan years after December 31, 2023

Summary

The IRS adjusted the applicable dollar amounts used to calculate the Employer Shared Responsibility Payments (ESRP) under §4980H (a) & (b). This is effective for taxable years and plan years after December 31, 2023.

• The penalty applies to ALEs under the ACA.
• The premium adjustment percentage for 2024 is 1.49%
• For calendar year 2024, the adjusted $2,000 amount is $2,970 (the “a” penalty).
• The adjusted $3,000 amount is $4,460 (the “b” penalty).

Employer Application

ALEs may be subject to the ESRP if they fail to offer

• minimum essential coverage (MEC) to 95% of full-time employees (FTE) and their dependents (“a” penalty); or
• coverage that is not affordable or does not provide minimum value (the “b” penalty).

Note

Only FTEs are considered, and a penalty is triggered if a FTE purchases Marketplace coverage and receives it subsidized via premium tax credit. Therefore, employers should ensure Form 1095-C is accurately completed, as this is what the IRS uses to determine penalties. An employer will receive a 226-J Letter from the IRS if they are liable for penalties.