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ACA Penalties Increased for 2021

Recently the IRS updated its ACA webpage and FAQs reflecting the indexed changes to the 2021 ACA penalties that could apply to applicable large employers (ALEs).

Penalty A, which could apply when an applicable large employer fails to offer MEC to at least 95% of full-time employees, will increase from $2,570 per year to $2,700 for 2021.  Penalty B, which could apply when an ALE’s offered coverage either is unaffordable or does not meet minimum value, will increase from $3,860 for 2020 to $4,060 per year for 2021. 

It is important to understand that many ALEs will face reporting challenges for 2020 due to furloughs, layoffs and other employment decisions made in response to COVID-19. This might affect employees’ full-time, part-time, or termination status as well as their eligibility for coverage, which will affect reporting for 2020. Therefore, employers should go ahead and determine the correct codes that should be used for reporting due in Q1 2021.

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