Pay or Play Penalties Will Increase for 2021

The Internal Revenue Service (IRS) has recently updated its frequently asked questions (FAQs) to include increased pay or play penalty amounts for the 2021 calendar year.

Since 2014, the applicable per-employee dollar amounts of $2,000 and $3,000 have been increased based on the premium adjustment percentage for the year. For the 2021 calendar year, the following adjusted amounts will increase:

  • The adjusted $2,000 amount will increase to $2,700.
  • The adjusted $3,000 amount will increase to $4,060.

Background

The Affordable Care Act (ACA) requires applicable large employers (ALEs) to offer affordable, minimum value health coverage to full-time employees or pay a penalty — which is also known as “employer shared responsibility” or “pay or play” rules.

The following Section 4980H(a) penalty and Section 4980H(b) penalty can apply under the employer shared responsibility rules:

  • Section 4980H(a) penalty — Applies when an ALE does not offer coverage to “substantially all” full-time employees and dependents.
  • Section 4980H(b) penalty — Applies when an ALE does not offer coverage to all full-time employees, the coverage is unaffordable, or an ALE does not provide minimum value.

To avoid costly penalties and remain compliant with the ACA, employers should ensure that they are offering the required coverage. For more information, click here.


It is our goal to guide you through ongoing compliance updates. Questions? Contact our team at 866-306-0200 or solutions@creativebenefitsinc.com.