IRS Announces 2025 ACA Pay or Play Penalties

The IRS recently announced ACA pay or play penalty amounts for 2025.

The penalties apply to all Applicable Large Employers (ALEs). For 2025, the “A” penalty is $2,900 and the “B” penalty is $4,350. As a reminder, these penalties are calculated monthly. The monthly penalty is equal to the annual penalty listed above divided by 12. The IRS only counts full-time employees calculating penalties.

The “A” Penalty

An employer is subject to the “A” penalty if they fail to offer minimum essential coverage to 95% of its full-time employees and their dependents and any full-time employee receives a premium tax credit to purchase subsidized coverage through the Marketplace. The $2,900 penalty is per full-time employee, minus the first 30 employees. The “A” penalty applies to each full-time employee, even if they did not receive a premium tax credit and purchase Marketplace coverage.

The “B” Penalty

An employer is subject to the “B” penalty if they do not offer coverage that is affordable and provided minimum value and any full-time employee receives a premium tax credit to purchase subsidized coverage through the Marketplace. The “B” penalty is only levied for each full-time employee that receives the tax credit and purchases Marketplace coverage.

The IRS says that an employer plan “provides minimum value if it covers at least 60 percent of the total allowed cost of benefits” expected to be incurred by the plan. Coverage is affordable if the employee’s required contribution for self-only coverage does not exceed a certain percentage of their household income for the taxable year. The IRS has not yet released this percentage for 2025.

For additional guidance on ACA compliance obligations, check out the Affordable Care Act Reporting Cheat Sheet.