Updates to ACA Pay or Play Penalties & IRS E-File Threshold for 2024

This E-Alert outlines two updates that will impact ACA Employer Mandate Compliance in 2024: 1) Increased Pay or Play Penalty Amounts; and 2) Reduction to ACA Paper Filing Threshold for Employers.

This E-Alert is of interest to Applicable Large Employers (ALEs) - generally those with 50 or more full-time employees (including full-time equivalent employees). Under the ACA’s employer shared responsibility ("Pay or Play") provisions, large employers may be subject to a penalty if they do not offer affordable coverage that provides minimum value to their full-time employees and their dependent child(ren), and/or if they fail to report on their compliance via IRS 1094/5-C reporting.

2024 ACA Penalty Increase
Under the Pay or Play rules, an ALE (applicable large employer) could be liable for a penalty if at
least one full-time employee receives a subsidy for Exchange coverage. The IRS notice announcing the increase to ACA Employer Mandate Penalties for 2024 can be reviewed by clicking here. An outline on the increase and refresher on the two penalty types is included below. The penalties will be based on the 2024 calendar year and the information reported during the ACA reporting period in early 2025. If the ALE is offering affordable and minimum value coverage to full-time employees, the employees are not eligible for Exchange coverage or subsidies.

Penalty A (under Section 4980H(a))
The ALE would be subject to this penalty if they do not offer minimum essential coverage to 95% of all full-time employees (penalty calculation would deduct the first 30 employees) and their dependents. The penalty would come about if any full-time employee purchases subsidized coverage through the Exchange.

Penalty B (under Section 4980H(b))
The ALE would be subject to this penalty if they do not offer coverage that is affordable and
provides minimum value. The penalty would come about if a full-time employee receives
subsidized coverage through the Exchange. The penalty would apply per employee receiving a
subsidy through the Exchange if triggered.

Significant Reduction in IRS E-File Threshold Beginning in 2024
Earlier this year, the IRS released final regulations amending the threshold for ACA paper filing returns annually. Specifically, the new cap for paper filing ACA information, as well as other
important tax documents, such as W-2s and 1099s, is 10, down from 250.

As a result, beginning January 1, 2024, employers will no longer be able to paper file if they have 10 or more 1095-C forms and instead will need to file their ACA information electronically.
Organizations that rely on paper filing for completing their reporting obligations under the ACA’s Employer Mandate will need to revisit their process going forward.

Marshall & Sterling is here to help!
If you have any questions on the above information, or if you would like to inquire about our ACA reporting services (including IRS E-Filing), please do not hesitate to reach out!