2024 ACA Pay or Play Increasing Penalties
On March 9, 2023, the IRS revised the penalty amounts for the employer shared responsibility (pay or play) rules under the Affordable Care Act (ACA) for 2024. For the calendar year 2024, the adjusted $2,000 penalty amount is $2,970, and the revised $3,000 penalty amount is $4,460.
Pay Or Play Penalty
An applicable large employer (ALE) that complies with the pay or play regulations is only subject to penalties if at least one full-time employee receives a subsidy for Exchange coverage. Employees provided affordable minimum value (MV) coverage must be qualified for these Exchange subsidies. Based on the circumstances, the pay-or-play rules allow for applying either the 4980H(a) penalty or the 4980H(b) penalty.
- Under Section 4980H(a): If an ALE does not provide coverage to typically at least 95% of its full-time workers (and dependents), and any full-time worker obtains a subsidy toward their Exchange plan, the ALE will be subject to a penalty. For any applicable month, the monthly fine imposed on ALEs that do not provide coverage to almost all full-time employees and their families equals the number of full-time employees at the ALE (minus 30), multiplied by 1/12 of $2,000 (as adjusted).
- Under Section 4980H(b): If at least one full-time employee receives a subsidy through an Exchange due to the ALE not providing coverage to all full-time employees, the ALE’s coverage being prohibitively expensive, or the ALE’s coverage not providing MV, the ALE may still be subject to a penalty even if it offers coverage to nearly all full-time employees (and dependents). For each full-time employee who receives a subsidy, an ALE is subject to a monthly fine equal to 1/12 of $3,000 (as adjusted) for any applicable month. Nevertheless, the 4980H(a) penalty amount is the maximum punishment for an ALE.
| Important Dates | Description |
| August 16, 2022 | For 2023, the IRS published revised pay-or-play penalty amounts. |
| March 9, 2023 | For 2024, the IRS published revised pay-or-play penalty amounts. |
| 2024 Calendar year | 2024 penalty amounts are based on a failure to provide affordable minimum value coverage during the 2024 calendar year |
IRS Pay Resources
The following IRS websites are available to employers for more information and updates regarding. pay or play provisions:
- Employer Shared Responsibility Provisions: https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions
- Types of Employer Payments and How They Are Calculated: https://www.irs.gov/affordable-care-act/employers/types-of-employer-payments-and-how-they-are-calculated
This ACA Pay Penalty Outline is provided for informational purposes only and should not be construed as legal or a recommendation of any kind. While we have attempted to provide current, accurate, and clearly expressed information, this information is provided “as is,” and MNJ Insurance Solutions makes no representations or warranties regarding its accuracy and completeness.
