ACA Pay or Play Penalties Increase in 2021
The Adjusted Penalty Amounts for 2021 are $2,700 and $4,060
Under the Affordable Care Act’s employer shared responsibility (pay or play) rules, applicable large employers—generally those who have 50 or more full-time employees (including full-time equivalent employees)—may be subject to a penalty if they do not offer affordable coverage that provides minimum value to their full-time employees and their dependent children.
Two separate penalties can apply under the employer shared responsibility rules—the Section 4980H(a) penalty and the Section 4980H(b) penalty.
The Section 4980H(a) penalty can apply when an ALE does not offer coverage to “substantially all” full-time employees (and dependents). The annual Section 4980H(a) penalty is calculated as the ALE’s number of full-time employees (minus 30) x $2,000 (as adjusted).
The Section 4980H(b) penalty can apply when an ALE does not offer coverage to all full-time employees, or the ALE’s coverage is unaffordable or does not provide minimum value. The annual Section 4980H(b) penalty is calculated as $3,000 (as adjusted) x the number of the ALE’s full-time employees who receive an Exchange subsidy.
After 2014, the applicable per-employee dollar amounts of $2,000 and $3,000 are increased based on the premium adjustment percentage for the year. The IRS announced that, for the 2021 calendar year, the adjusted $2,000 amount is $2,700 and the adjusted $3,000 amount is $4,060.