There is a lot of confusion out there concerning ACA penalties. The 2018 tax act did not eliminate any employer penalties for not offering health insurance coverage. The only change was reducing the individual coverage penalty to zero – however, this change does not go into effect until 1/1/2019.
Applicable large employers (ALEs) with more than 50 full-time equivalent (FTE) employees remain subject to the “A” penalty for not providing “minimum essential” coverage to at least 95% of full-time employees in 2018 and if at least one FTE employee receives a subsidy for marketplace coverage. This penalty is $193.33 per month for each employee (whether coverage is provided or not), after the first 30 employees. The IRS is notifying non-compliant employees of their potential liability for 2015 and additional years will follow.
In some cases where Penalty A does not apply, ALEs can still be subject to Penalty B, which applies if one or more qualified FTE employees find that coverage is not “affordable,” does not provide “minimum value,” or the employee is one of the 5% who is not offered coverage and any of these gets a subsidy on the exchange. In 2018, this penalty is $290 per employee per any month in which there is no qualified coverage and a subsidy was received. This is far less threatening, but employers should be aware of the exposure.
The change which goes away effective 1/1/2019 reduces the penalty to individuals required to have coverage but don’t (and there are a lot of potential holes in the requirement). For 2018, this penalty is the greater of:
- $695 for each adult and $347.50 for each child, up to a $2,085 maximum per family, or
- 2.5% of family income above the federal tax filing threshold
I doubt the IRS will vigorously go after non-compliant individuals, but who knows. They will go – and have been going – after employers. With all the confusion, it is easy to overlook ACA penalties. We do our best to keep our clients on the correct side of this issue.