The IRS recently released Revenue Procedure 2023-17, increasing the annual penalty for employers responsible for providing health insurance coverage to full-time employees as required by the Affordable Care Act (ACA). The coverage requirement is referred to as the employer mandate and applies to employers with 50 or more full-time equivalent employees.
The penalties are applied under separate conditions, but both are triggered when a full-time benefit-eligible employee receives subsidized coverage through Healthcare.gov or a state-based Marketplace.
Penalty A
While the penalty A dollar amount ($2,970) appears less costly, it is applied across all of an employer’s full-time employees (minus 30) when an employer doesn’t offer minimum essential coverage (MEC) to 95% of its full-time employees and their dependents. By example, an employer with 115 full-time employees who didn’t offer a health plan option, and one employee received subsidized coverage, would be assessed a $252,450 penalty (115 – 30 X $2,970).
Penalty B
The $4,460 penalty B applies when a full-time employee is offered MEC but receives subsidized coverage because the health plan didn’t provide minimum value protection (pays 60% of eligible expenses) and/or it wasn’t affordable.
Each year the IRS also updates the ACA affordability percentage used to determine the maximum premium employees eligible for health insurance can pay to avoid employer penalties. For 2023, the figure is 9.12%. Bukaty Companies will issue an update when the 2024 percentage is released.
For more information, contact your Bukaty benefits consultant at 913.345.0440
