Employer Mandate Reporting Penalties for 2021

The Internal Revenue Service (IRS) has started to issue penalties to employers that failed to comply with the ACA’s Employer Mandate for the last several tax years. Employers should note that the penalties have increased for failing to comply in the 2021 tax year.

For the 2021 tax year, the annual penalty amounts for ACA penalties are anticipated to be $2,700 for the 4980H(a) penalty and $4,060 for the 4980H(b) penalty.

Applicable Large Employers (ALEs) should note that for the 2021 tax year, the affordability component for satisfying the 4980H(b) component of the ACA’s Employer Mandate is set to 9.83% of the Federal Poverty Level (FPL), which is an increase from 2020. For employers, it’s important that when determining ACA affordability, you use the appropriate safe harbors available.

As a reminder, under the ACA’s Employer Mandate, ALEs are organizations with 50 or more full-time employees and full-time equivalent employees are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce.