Rev. Proc. 2024-14 (Feb. 12, 2024)
Available at https://www.irs.gov/pub/irs-drop/rp-24-14.pdf
The IRS has announced 2025 indexing adjustments to the applicable dollar amount used to calculate employer shared responsibility payments under the Affordable Care Act. As background, applicable large employers (ALEs) may be liable for an employer shared responsibility penalty under Code § 4980H(a) if they fail to offer minimum essential coverage to 95% of full-time employees (and their dependents, excluding spouses), if the employee receives subsidized coverage through an Exchange. Alternatively, ALEs may be subject to a Code § 4980H(b) 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 offered coverage is not affordable and minimum value. The adjusted penalty amount for failures occurring in the 2025 calendar year will be $2,900 under Code § 4980H(a) per full-time employee (less the 30-employee reduction) (a $70 decrease from 2024), and $4,350 under Code § 4980H(b) per full-time employee that receives subsidized coverage through an Exchange (a $110 decrease from 2024). (Current and previous penalty amounts are available on an IRS Q/A page.)
EBIA Comment: To avoid ACA employer shared responsibility penalties, employers are advised to regularly ensure full-time employees are identified and offered minimum essential coverage that is minimum value and affordable. As a reminder, the IRS uses Letter 226-J to inform ALEs of their potential liability under Code § 4980H. A response form (Form 14764), generally due within 30 days, is included with Letter 226-J so that an ALE can inform the IRS whether it agrees with the proposed penalty. Employers and their advisors should be on the lookout for this letter so that they are prepared to promptly review and respond. For more information, see EBIA’s Health Care Reform manual at Section XXVIII (“Shared Responsibility for Employers (Play or Pay Penalty Tax)”). See also EBIA’s Form 1094/1095 Workbook at Section XV (“Penalty Assessment”).
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