United States

Affordable Care Act "pay or play" penalties increase for 2015 and 2016


The Affordable Care Act (ACA) imposes penalties on certain employers that fail to offer health coverage that meets ACA standards. The penalties are called employer shared responsibility payments in the act, but are more commonly known as “pay or play” penalties. 

Employers that fail to offer minimum essential health coverage to substantially all of their full-time employees could face a penalty of $2,000 for each full-time employee if any employee purchases health insurance on the exchange/marketplace with government subsidies known as premium tax credits. Employers that offer health coverage that either is not affordable or does not provide minimum value could pay $3,000 for each full-time employee buying marketplace coverage with premium tax credits.

These dollar amounts are adjustable for inflation, and the IRS has issued a notice announcing the 2015 and 2016 penalty amounts. For 2015, the amounts are $2,080 ($173.33 per month) for failing to offer coverage, and $3,120 ($260 per month) for failing to offer affordable, minimum value coverage. For 2016, the penalties increase to $2,160 ($180 per month) and $3,240 ($270 per month), respectively.

For 2015, employers must file Form 1095-C with the IRS to report information about its health plan and workforce. The IRS will use the information from Form 1095-C and other sources to determine whether an employer is liable for the penalty. The IRS will then mail the employer a penalty assessment notice and provide the employer an opportunity to respond. Any penalty paid by the employer is nondeductible.

Additional information about the employer shared responsibility penalty and the Form 1095-C filing requirements are available on our Affordable Care Act resource center.


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