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Employer Mandate Penalties Will Increase for 2024


Applicable large employers (ALEs) that do not offer affordable, minimum-value health coverage to their full-time employees may be subject to increased penalties under the Affordable Care Act’s (ACA) employer mandate for 2024. ALEs are employers with 50 or more full-time employees (including full-time equivalent employees) on business days during the preceding calendar year.


Two separate penalties can apply under the ACA’s employer mandate—the Section 4980H(a) penalty and the Section 4980H(b) penalty.


The Section 4980H(a) penalty can apply when an ALE does not offer coverage to “substantially all” full-time employees. The annual Section 4980H(a) penalty is calculated as the ALE’s number of fulltime employees (minus 30) x $2,000 (as adjusted). For 2024, the adjusted penalty amount is $2,970.


The Section 4980H(b) penalty can apply when an ALE does not offer coverage to all full-time employees, or the ALE’s coverage is unaffordable or does not provide minimum value. The annual Section 4980H(b) penalty is calculated as $3,000 (as adjusted) x the number of the ALE’s full-time employees who receive an Exchange subsidy. For 2024, the adjusted penalty amount is $4,460. However, the total penalty for an ALE is limited to the Section 4980H(a) penalty amount.

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