IRS ups Affordable Care Act employer shared responsibility penalties

The Internal Revenue Service announced indexing adjustments to the applicable dollar amount used to calculate employer shared responsibility payments under the Affordable Care Act.

Effective for taxable years and plan years beginning after Dec. 31, 2025, the adjusted amount for failures will be $3,340 under Code Section 4980H(a) per full-time employee, and $5,010 under Section 4980H(b) per full-time employee that receives subsidized coverage through an exchange. These changes reflect a $440 and $660 increase, respectively, from 2025.

Under Code Section 4980H(a), applicable large employers, or ALEs, may be liable for an employer shared responsibility penalty if they fail to offer the minimum essential coverage to 85% of full-time employees (and their dependents, excluding spouses), if the employee receives a subsidized coverage through an exchange. 

Alternatively, under Code Section 4980H(b), ALEs may be subject to a penalty if they offer minimum essential coverage to full-time employees who receive subsidized coverage through an exchange, but the offered coverage is not affordable and of minimum value. 

To calculate the 2026 adjustment, the Department of Health and Human Services used data from the National Health Expenditure Accounts.