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How much are Affordable Care Act Penalties?



ACA Penalties

Hello again,

When it comes to ACA management, the clock is ticking all year long. Penalties occur from mistakes made during the year—you could be accumulating fines in June and not even know it until January.

As soon as a mistake is made, the meter starts running. Even worse, you can’t go back and change it. With penalties up to $2,160 per full-time employee, accurate reporting could make or break a business. [Penalties are indexed yearly for inflation.]

How Much are the Employer Shared Responsibility Provisions (ESRP)?

The ESRP is also known as the shared responsibility payment, the ACA Tax Penalty, and Pay or   Play. The ESRPs apply to Applicable Large Employers (ALEs) who are mandated to offer qualifying coverage to full-time employees and their dependents up to age 26, excluding step and foster children.

Type A, also known as the sledgehammer penalty—for any month that an ALE does not offer minimum essential coverage to at least 95% of its full-time employees (and their dependents), the ALE will be liable if at least one full-time employee receives the premium tax credit for purchasing coverage through the Marketplace. This penalty is $2,160 for every full-time employee (minus the first 30 full-time employees). Clearly, this can add up very quickly.

Type B, also known as the tackhammer penalty—If an ALE does offer coverage to at least 95% of its full-time employees and their dependents but at least one full-time employee receives a federal premium tax credit for marketplace coverage, the employer must pay $3,240 for each employee receiving the tax credit. This is the yearly amount, but is prorated on a monthly basis if an eligible employee was offered qualifying coverage for part of the year.
Penalties are indexed for inflation each year, and penalties are not tax deductible like Insurance contributions.

Passport Software’s ACA Software:

  • Protects your business from costly reporting errors
  • Monitors employee status throughout the year
  • Simplifies Reporting

Learn more: Passport Software’s ACA Software

Passport Software, Inc. does not offer legal advice, please contact your accountant for tax reporting. Learn more about Employer Shared Responsibility Fee at Irs.gov  

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