ACA Pay or Play Penalties Will Increase for 2021

On Aug. 19, 2020, the IRS updated its FAQs on the pay or play penalties to include the following increased penalty amounts for the 2021 calendar year:

  • The Section 4980H(a) penalty can apply when an ALE does not offer coverage to “substantially all” full-time employees (and dependents). The annual Section 4980H(a) penalty is calculated as the ALE’s number of full-time employees (minus 30) x $2,000 (adjusted to $2,700 for 2021).
  • 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 (adjusted to $4,060 for 2021) x the number of the ALE’s full-time employees who receive an Exchange subsidy.

Refer to the attached Compliance Bulletin for details.

ACA Pay or Play Penalties Will Increase for 2021