Applicable large employers (ALEs) that do not offer affordable, minimum-value (MV) health coverage to their full-time employees may be subject to increased penalties under the Affordable Care Act’s (ACA) employer mandate for 2026. ALEs are employers with 50 or more full-time employees (FTEs), including full-time equivalent employees, on business days during the preceding calendar year.
Depending on the circumstances, one of two penalties may apply under the pay-or-play rules, the 4980H(a) penalty or the 4980H(b) penalty, as follows:
- Under Section 4980H(a), an ALE will be subject to a penalty if it does not offer coverage to substantially all FTEs and any one of its FTEs receives a subsidy for purchasing individual health coverage through an Exchange. This monthly penalty is equal to the ALE’s number of FTEs (minus 30) multiplied by one-twelfth of $2,000 (as adjusted) for any applicable month. For 2026, the penalty increases to $3,340 (up from $2,900 for 2025); and
- Under Section 4980H(b), ALEs that offer coverage to substantially all FTEs may still be subject to a penalty if at least one FTE obtains a subsidy through an Exchange because the ALE did not offer coverage to all FTEs, or the ALE’s coverage is unaffordable or does not provide MV. The monthly penalty assessed on an ALE for each FTE who receives a subsidy is one-twelfth of $3,000 (as adjusted) for any applicable month. For 2026, the penalty increases to $5,010 (up from $4,350 for 2025). However, the total penalty for an ALE is limited to the 4980H(a) penalty amount.
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