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Section 105 plans for dummies

There are many different section 105 plans you can use to offer health benefits to your employees, including the QSEHRA and ICHRA. Learn about them here.

Section 105  |  Josh Miner

IRS increases employer mandate penalties for 2021

Wtitten by: Sue Thurber
Nov 25, 2020 4:20:00 PM

Applicable large employers (ALEs), 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 (ACA; P.L. 111-148, as amended) 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.

The IRS recently updated its Q&As for the ESRP that show increased penalties for failing to meet the ACA employer mandate in 2021. 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): 2021 penalty is $2,700 per full-time employee if only one full-time employee receives subsidized coverage through the Exchange or Marketplace, a 5.1% increase from the $2,570 amount for 2020.

An applicable large employer that fails to offer affordable or minimum value coverage (Section 4980H(b) penalty): 2021 penalty is $4,060 per full-time employee who receives subsidized coverage through the Exchange or Marketplace, a 5.2% increase from the $3,860 amount for 2020.

How employers report compliance with the employer mandate

Employers report they are meeting the mandate using IRS Forms 1094-C and 1095-C. As reported in an earlier blog post, 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.

Have more questions about ALEs and the employer mandate?

Read more in our FAQ.

Topics: Employer Mandate

Learn more about each HRA

QSEHRA

Employers with 1-49 employees

A simple, controlled-cost alternative to group health insurance.

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ICHRA

For employers of all sizes

A flexible health benefit solution that can be used alone or alongside group health insurance.

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GCHRA

For employers offering group coverage

A group health supplement to help employees with out-of-pocket expenses.

Learn More