IRS Releases Decreased ACA Employer Shared Responsibility Penalties for 2025

The Internal Revenue Service (IRS) has issued Rev. Proc. 2024-14, which contains the 2025 indexing adjustments to the dollar amount used to calculate employer shared responsibility payments under the Affordable Care Act (ACA).

The ACA provides that applicable large employers (ALEs) can be responsible for an employer shared responsibility penalty under Code § 4980H(a) in some circumstances. More specifically, if ALES do not offer minimum essential coverage to at least 95% of their employees, along with their dependents, excluding spouses, and the employee receives subsidized coverage through an Exchange, the ALE may have to pay the penalty. On the other hand, ALES also can be subject to a penalty under Code § 4980H(b). They may receive this penalty if they offer minimum essential coverage to full-time employees and their dependents, excluding spouses, who receive subsidized coverage through an Exchange, but the coverage is not affordable and minimum value.

For the 2025 calendar year, the adjusted penalty amount under Code § 4980H(a) is $2,900 per full-time employee (less the 30-employee reduction). The adjusted penalty amount under Code § 4980H(b) is $4,350 per full-time employee who receives subsidized coverage through an Exchange. These figures are a $70 decrease and a $110 decrease over the 2024 figures, respectively.

Employers can avoid these penalty amounts altogether by regularly identifying full-time employees and ensuring that they are offering them minimum essential coverage that is both minimum value and affordable. If the IRS advises an employer that it may be subject to a Code § 4980H(a) or § 4980H(b) penalty, a response is generally due within 30 days. Therefore, employers should be on the lookout for these letters from the IRS and be prepared to respond quickly and thoroughly as to whether it agrees with the proposed penalty.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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