On March 9, 2023, the IRS issued Rev. Proc. 2023-17 reflecting the indexed changes to the 2024 calendar year ACA penalties that could apply to applicable large employers (ALEs).
Penalty A, which could apply when an applicable large employer fails to offer minimum essential coverage (MEC) to at least 95% of full-time employees, will increase to $2,970 for 2024. The monthly penalty assessed on ALEs who fail to offer coverage to at least 95% of full-time employees and their dependents is equal to the number of FT employees (less the first 30) times 1/12 of $2,970 for any month in which a penalty applies. In other words, $247.50 per month per full-time employee minus 30 could be applied for an ALE who fails to offer MEC to at least 95% of full-time employees.
Penalty B, which could apply when an ALE’s offered coverage either is unaffordable or does not meet minimum value, will increase to $4,460 per year for the calendar year 2024. The monthly penalty assessed for each full-time employee who receives a subsidy on the exchange is equal to 1/12 of $4,460 for any month in which a penalty applies, or $371.67 per month per full-time employee who receives a subsidy.
To avoid such penalties, employers should determine each calendar year if they are an applicable large employer, and then ensure minimum essential coverage is offered to at least 95% of all full-time employees and their dependents. In addition, the coverage should meet minimum value and be considered affordable under one of the three affordability safe harbors (federal poverty level, rate of pay, or W-2 safe harbors).
If you have questions, please reach out to a member of your Hausmann Group team.