The IRS has recently released information on the penalty rates for violations of the Affordable Care Act’s (ACA) employer-shared responsibility provisions for the year 2024. Applicable large employers (ALEs), which are employers with 50 or more full-time equivalent employees, must comply with these provisions. Otherwise, they are subject to one of two penalties.
First Penalty
The first penalty applies if an employer does not provide health care coverage to substantially all its full-time employees, and a low-income, full-time employee receives a premium tax credit through a Marketplace. The penalty is an annual fee of $2,000 (adjusted for inflation) multiplied by the number of full-time employees over 30.
Second Penalty
The second penalty applies if an employer offers unaffordable health care coverage to its full-time employees or does not provide “minimum value, ” and a low-income, full-time employee receives a premium tax credit through a Marketplace. In this case, the employer must pay an annual penalty of $3,000 (adjusted for inflation). Additionally, this must be paid for each full-time employee who receives the premium tax credit. However, this penalty is capped at $2,000 multiplied by the number of full-time employees in excess of 30.
Revenue Procedure
The IRS has announced that the first penalty rate per applicable employee will be $2,970 in 2024, up from $2,880 in 2023. The second penalty rate will be $4,460 in 2024, up from $4,320 in 2023. These new rates will apply to taxable years and plan years beginning after December 31, 2023.
For further details, please refer to Revenue Procedure 2023-17, which can be accessed at https://www.irs.gov/pub/irs-drop/rp-23-17.pdf.
Additionally, if you need help with these and other IRS announcements, contact Kona HR today!
