Applicable Large Employers – ACA Penalties Still Enforced for Non-Compliance

Despite the numerous changes to the Affordable Care Act (ACA), applicable large employers (ALE) must still provide group health benefits to their employees. These benefits must meet at least the minimum standard as set by the federal government or the employer will be required to pay a penalty.

An ALE is a company that has at least 50 full-time employees (those who work at least 30 hours per week) and full-time equivalent employees (FTE). That means part-timers count in this calculation. Total part time hours worked in the company divided by 120 gives FTE equivalents.

Penalties will be levied when the ALE:

• Does not offer minimum essential coverage to at least 95% of full-time employees AND any full-time employee receives a premium tax credit and/or cost-sharing reduction after enrolling in coverage on the ACA Marketplace.
• Offers coverage that does not meet the minimum value and affordability requirements AND a full-time employee.

Receives a premium tax credit and/or cost-sharing reduction after enrolling in coverage on the ACA Marketplace.
The 2021 penalties include:

• A Penalty: $225 per month per employee (less the first 30) or $2,700 annualized for 2021 for failing to offer minimum essential coverage. This penalty is assessed for all full-time eligible employees in the ALE even if just one employee receives premium assistance on the Marketplace.
• B Penalty: $338.33 per month or $4,060 annualized per employee who received premium assistance on the Marketplace when offering coverage that does not meet minimum value or affordability requirements. This penalty is capped so that it does not exceed the maximum calculated for the A penalty.

​Employers who have difficulty meeting these requirements can seek group health plans that help them avoid the penalties while still providing employees with some level of group health plan coverage. For instance, Allied National offers the Minimum Essential Coverage Plan (MEC) which covers the cost of federally mandated preventive services at 100% of eligible charges. This plan satisfies the ACA employer mandate to provide minimum essential coverage and eliminates the Part A penalty for applicable large employers.

If your company has fewer than 50 full-time equivalent employees, this mandate and tax penalty do not apply to you. However, offering health benefits to your employees is a great way to recruit and retain employees. In fact, we wrote a blog on this topic. Check out How to Keep Your Small Business Employees Happy and Healthy with Robust Benefits.

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Allied National

Founded in 1970, Allied is one of the nation's oldest and most experienced third-party administrators. Allied National is a 90 Degree Benefits Company, a subsidiary of Blue Cross Blue Shield of Alabama. As the small group benefit experts, Allied works with small business employers to provide unique and affordable group health benefits