IRS Provides Indexed Amounts for Calculation of 2025 Employer Shared Responsibility Payments

On February 12, 2024, the IRS released Revenue Procedure 2024-14, which in part provides indexing adjustments for penalties under the ACA employer mandate. As a reminder, the ACA requires applicable large employers (ALEs), those with 50 or more full-time employees (FTEs) and full-time equivalent employees, to offer affordable minimum value (MV) coverage to all FTEs and their dependents or risk a penalty.

Notably, the employer mandate penalty amounts for 2025 are reduced from the 2024 penalty amounts. For plan years beginning on or after January 1, 2025, the annual penalties are calculated as follows:

• Penalty A (failure to offer minimum essential coverage to 95% of all FTEs and their dependents and at least one FTE who receives a premium tax credit):
  • (Total Number of FTEs - 30*) x $2,900 (for 2024: $2,970)
  • *If applicable, the 30-employee reduction is allocated ratably among controlled group members based on the number of FTEs employed by each member.
• Penalty B (failure to offer affordable coverage that meets MV standards):
  • (Number of FTE(s) who receive a premium tax credit) x $4,350 (for 2024: $4,460)

Both penalties, although commonly expressed as annual amounts, are assessed monthly.

ALEs should regularly verify that employees who generally work at least 30 hours per week are offered affordable MV coverage to avoid ACA employer mandate penalties. The IRS uses Letter 226-J to inform employers of their potential liability for such penalties. Employers should promptly review and respond to any IRS Letter-226-J they receive and consult with counsel as necessary.

Revenue Procedure-2024-14 »