IRS increases employer mandate penalties for 2023

Written by: Gabrielle Smith
Published on November 2, 2022.

Applicable large employers (ALEs), or organizations that have 50 or more full-time employees, must meet the Employer Shared Responsibility Provisions (ESRP) of the Patient Protection and Affordable Care Act, commonly referred to as the employer mandate.

The employer mandate requires all ALEs, including government entities and nonprofit organizations, to offer their full-time employees health insurance that is affordable and provides minimum value, or be subject to penalties in the form of payments under the employer shared responsibility provisions.

What are the employer mandate penalties for 2023?

The IRS recently updated its Q&As for the ESRP that show increased penalties for failing to meet the ACA employer mandate in 2023.

Q&A #55 lists the indexed annual ACA employer amounts for penalties as follows:

An applicable large employer that fails to offer minimum essential coverage to 95% of full-time employees (Section 4980H(a) penalty): 2023 penalty is $2,880 per full-time employee if only one full-time employee receives subsidized coverage through the Exchange or Marketplace, a 4.7% increase from the $2,750 amount for 2022.

An applicable large employer that fails to offer affordable or minimum value coverage (Section 4980H(b) penalty): 2023 penalty is $4,320 per full-time employee who receives subsidized coverage through the Exchange or Marketplace, a 5.2% increase from the $4,120 amount for 2020.

How do employers report compliance with the employer mandate?

Employers report they are meeting the mandate using IRS Forms 1094-C and 1095-C. Form 1095-C now includes affordability codes that employers offering an ICHRA use to show how they determined the allowance they offered gives employees affordable coverage.

It’s useful for employers to know that in many cases states that have an individual mandate, including California, New Jersey, Rhode Island, Vermont, and the District of Columbia, a properly completed Form 1095-C satisfies the reporting requirement.


As the IRS increases the penalty for not adhering to the employer mandate, it's increasing more important for ALEs to find affordable health benefits that satisfy the ACA's requirements. If you're looking for an affordable benefit for 2023, PeopleKeep can help. 

Schedule a call with a personalized benefits provider today to see how a health reimbursement arrangement (HRA) can help your organization meet the employer mandate.

Originally published on November 2, 2022. Last updated November 2, 2022.


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