Feb 16, 2024
IRS Announces ACA Penalties for 2025 Under Code §4980H (a) and (b)
February 2024
On February 12, 2024, the IRS released Rev. Proc. 2024-14 to provide the adjusted excise tax amounts under the Affordable Care Act’s Employer Shared Responsibility provisions (also known as the ACA Pay or Play Penalty) for 2025.
The adjusted penalty amount for failures occurring in the 2025 calendar year will be:
- $2,900 under Code §4980H(a) per full-time employee (less the 30-employee reduction) (a $70 decrease from 2024), and
- $4,350 under Code §4980H(b) per full-time employee that receives subsidized coverage through an Exchange (a $110 decrease from 2024).
Reminder of the §4980H Offer of Coverage Requirements
The offer of coverage requirements for ALEs under §4980H are as follows:
- §4980H(a) – ALEs must offer minimum essential coverage (MEC) to at least 95% (or all but 5, if greater) of full-time employees and their dependent children each month. An offer of coverage is not required for spouses.
- §4980H(b) – ALEs must offer coverage that provides minimum value AND is affordable to all full-time employees each month. There is not a 5% “margin of error” for §4980H(b) requirements like there is under §4980H(a).
NOTE: Only an offer of group medical coverage is required to satisfy §4980H offer of coverage requirements. The employer could choose not to offer other benefits (e.g., dental, vision, life, disability).
Current and previous ACA Penalty Amounts are also available on the IRS Question and Answer page (Question #55)
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