Cost of ACA Employer Mandate Penalties to rise for 2024

It may seem like you are just getting into a groove for 2023, but with penalties for ACA noncompliance rising, employers must pay attention to and prepare for increasing penalties and parameters for 2024.

The Internal Revenue Service has revealed increased employer mandate penalties for non-compliant applicable large employers (ALEs) under the Affordable Care Act (ACA) for 2024. With these penalties for noncompliance rising, it is vital employers pay close attention to the changing parameters around ACA regulations. As the 2022 reporting season finishes up, all eyes should be on ACA requirements and regulations for 2023 and 2024.

What is changing in 2024?

Noncompliance penalties are increasing for 2024.

• Penalty A will increase from $2,880 ($240/month) in 2023 to $2,970 ($247.50/month).

• Penalty B will increase from $4,320 ($360/month) in 2023 to $4,460 ($371.67/month).

These new penalty amounts will be effective for taxable years and plan years beginning after December 31, 2023.  The rising cost of noncompliance should serve as a further incentive for employers to examine their group health plan offerings to help ensure broad enough coverage to full-time employees with at least one self-only option that is affordable and provides minimum value benefits.

Definitions Explained

• Penalty A: Failure to offer minimum essential coverage to 95% of full-time, benefits eligible employees

• Penalty B: Failure to provide affordable, minimum value coverage to a benefits eligible employee  

The affordability threshold – used for employer shared responsibility provisions to determine whether employer-sponsored health coverage is considered affordable –has not yet been announced for 2024.  For 2023, the affordability threshold is 9.12%, a decline from 9.61% in 2022. These percentages are used to determine the amount of household income eligible individuals can contribute toward the cost of coverage in order for it to be considered affordable.

Employers who are out of compliance with either condition may be subject to the newly increased IRS penalties. Under IRS definitions for the ACA, if an employer has at least 50 full-time employees (including full-time equivalent employees) during the prior year, that employer is considered an ALE for the current calendar year. For either penalty to apply to an ALE, they must be out of compliance and at least one full-time employee must receive the premium tax credit for purchasing coverage through the Marketplace.

Finding Support to Help You Mitigate Your Risk

With the stakes becoming even higher in 2024, it’s critical that your organization maintains ACA regulatory requirements. Having your C-suite support can help your HR teams put initiatives in place to help you meet these requirements. To help you get these crucial conversations started, we’ve put together this blueprint so your C-suite can better understand the risks in the coming year.

The information provided is intended as general guidance and is not intended to convey any tax, benefits, or legal advice. For information pertaining to your company and its specific facts and needs, please consult your own tax advisor or legal counsel.  Equifax Workforce Solutions provides services that can help employers reduce their compliance risks. Details on our provision of these services and related support will be contained in your services agreement. Links to sources may be to third party sites. We have no control over and assume no responsibility for the content, privacy policies or practices of any third party sites or services.