IRS Announced 2027 ACA Pay or Play Penalties
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The IRS has announced the 2027 ACA pay-or-play penalty amounts for Applicable Large Employers (ALEs). Employers that fail to offer affordable, minimum value coverage to eligible full-time employees may face significant penalties under the ACA employer mandate rules. Learn the updated “A” and “B” penalty amounts, affordability requirements, and key compliance considerations for 2027.
The IRS recently announced ACA pay or plan penalty amounts for 2027. The penalties apply all Applicable Large Employers (ALEs). For 2027, the “A” penalty is $3,780 and the “B” penalty is $5,670. 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 failed to offer minimum essential coverage to 95% of its full-time employees and their dependents and any full-time employee received a premium tax credit to purchase subsidized coverage through the Marketplace. The $3,780 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 was affordable and provided minimum value and any full-time employee received a premium tax credit to purchase subsidized coverage through the Marketplace. The “B” penalty is only levied for each full-time employee that received 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.
It’s important to track your ACA compliance throughout the year so you are not subject to these penalties.
If you have questions about these penalties or any aspect of ACA compliance, contact your OneDigital Benefits Compliance consultant.