Study Estimates Affordable Care Act Penalties Could Reach $31 Billion

Nationwide, employers’ potential exposure to the Affordable Care Act’s (ACA) employer penalties, which apply if an applicable employer fails to offer adequate, affordable coverage, could reach $31 billion for 2016 according to a new report from Accenture, a global management consulting firm.  This exceeds previous Congressional Budget Office projections that non-compliant employers would face $21 billion in penalties for 2016.

Accenture’s analysis found that the additional $10 billion in penalties could be attribution to a group of employers considered “unintentionally non-compliant,” i.e., those employers that offered adequate, affordable coverage but failed to meet the ACA’s reporting requirements to demonstrate to the IRS that they have complied with the law.

The ACA imposes an “employer shared responsibility” requirement, often known as the “employer mandate,” which requires applicable large employers (ALE’s) – employers with at least 50 full-time employees – to provide their full-time employees (and their dependents) with the opportunity to enroll in minimum essential coverage under an employer sponsored plan; such coverage must also be affordable and provide minimum value.

If an ALE fails to comply with these coverage requirements and a full-time employee obtains subsidized health insurance coverage through a state- or federally-run exchange, the ALE can be assessed a penalty between $2,160 and $3,240 for each full-time employee that obtains subsidized coverage (excluding the first 30 full-time employees). For 2016, ALE’s must establish that minimum essential coverage was offered to at least ninety-five percent (95%) of their employees, which is a substantial increase from 2015’s seventy percent (70%) threshold and another reason for the potential increase in employer penalties according to Accenture.

In addition to providing the required minimum essential coverage, the ACA generally requires every health insurance sponsor or self-insured health plan to file annual information returns for each individual for whom such coverage is provided (IRS Forms 1094-C and 1095-C). The purpose of these forms is to allow employees to demonstrate, and the IRS to verify, which months employees were covered by minimum essential coverage during the calendar year. 2016 ACA reporting information must be filed with the IRS no later than February 28, 2017 (if filing paper forms) or March 31, 2017 (if filing electronically).  The IRS has extended the time employers have to provide completed Form 1095-C’s to employees from January 31, 2017, to March 2, 2017.

Although the incoming Trump Administration has vowed to repeal the Affordable Care Act with the support of the newly elected Congress, it is important to remember that the ACA is still the law today, and we recommend employers work under the law as it currently stands, and not under laws that do not yet exist.

If you have questions about the Affordable Care Act or other employee benefit topics which may impact your business or organization, please contact attorney Steve Theising at or (812) 423-3183, or contact any member of the KDDK Tax and Employee Benefits Team.

About the Author

Steven M. Theising, Indiana Attorney
Steve Theising

Steven M. Theising, an attorney at Kahn, Dees, Donovan & Kahn, LLP (KDDK), in Evansville, Indiana, practices primarily in the areas of business, real estate, tax and employee benefits, construction, and healthcare law. Steve utilizes his accounting and financial background to provide both legal and practical business analysis in negotiating, resolving and closing business, construction and real estate transactions and disputes. He also assists clients with addressing and resolving estate planning issues.

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