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2025 ACA penalties announced: Which penalties apply to who?

Updated: May 30



In a recent update from the IRS, the penalty amounts for the 2025 calendar year have been released for penalty A and penalty B, which are related to the employer mandate penalties applicable to large employers with 50 or more full-time employees. Let's delve into the details of these penalties and what employers should be aware of.


Penalty A for 2025: $22,900 per Employee


For the 2025 calendar year, penalty A has been decreased and is now set at $22,900 per employee for the full year, minus the first 30 employees. This penalty is significant and applies to employers who fail to offer minimum essential coverage to at least 95% of their full-time eligible employees and their dependents. Referred to as the "sledgehammer penalty," it can have serious financial implications for employers who are subject to it.


Penalty B for 2025: $4,350 per Employee


The updated penalty B amount for 2025 is $4,350 per employee who goes to the exchange and receives a premium tax credit. This penalty is typically pro-rated for the months in which the employee was not offered minimum essential coverage or affordable coverage, leading them to seek a premium tax credit through the exchange. Penalty B is an annualized per-employee penalty and is lower than penalty A in terms of the total amount.


Ensuring Compliance for Applicable Large Employers


As we approach 2025, it is crucial for applicable large employers to have proper coverage in place and ensure that at least 95% of their full-time eligible employees and dependents are offered minimum essential coverage. Failing to comply with these requirements can result in significant financial penalties for employers.


Thank you for watching and remember to prioritize compliance with the updated IRS penalty amounts to avoid any potential issues in the future.

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