Employer Mandate Penalties Will Increase for 2024

Applicable large employers (ALEs) that do not offer affordable, minimum-value health coverage to their full-time employees may be subject to increased penalties under the Affordable Care Act’s (ACA) employer mandate for 2024. ALEs are employers with 50 or more full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.

Two separate penalties can apply under the ACA’s employer mandate—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. The annual Section 4980H(a) penalty is calculated as the ALE’s number of fulltime employees (minus 30) x $2,000 (as adjusted). For 2024, the adjusted penalty amount is $2,970.

• 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. For 2024, the adjusted penalty amount is $4,460. However, the total penalty for an ALE is limited to the Section 4980H(a) penalty amount.