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ACA “Pay or Play” Penalties Still Apply – IRS Confirmation

September 12, 2019

A recent information letter from the IRS Office of Chief Counsel was released regarding the employer shared responsibility penalties (“pay or play”) under the ACA (Affordable Care Act).  The information letter confirms employer shared responsibility penalties still apply to ALEs (Applicable Large Employers) that fail to offer acceptable health coverage to their full-time employees and their dependents.

Other important information included in the letter:

  • The law does not provide for any waiver of the pay or play penalties;
  • Several forms of transition relief were available for 2015 & 2016; however, no transition relief is available for 2017 and future years.

Pay or Play Background

The employer shared responsibility rules of the ACA require applicable large employers (ALEs) to offer affordable, minimum value health coverage to their full-time employees or pay a penalty.  This employer mandate is often referred to as the “pay or play” rule and only applies to ALEs.  ALEs are employers with, on average, at least 50 full-time employees during the preceding calendar year.  Full-time equivalent employees (FTEs) are also included in this – typically a full-time equivalent is an employee working at least 30 hours per week.  Penalties are issued to ALEs only if one or more full-time employees received an Exchange subsidy because the ALE does not offer health coverage, or offers coverage that is unaffordable, or does not provide minimum value.

A January 2017 executive order signed by President Trump intended “to minimize the economic and regulatory burdens” of the ACA until the law can be repealed and eventually replaced.  It broadly directs the Department of Health and Human Services and other federal agencies to waive, delay or grant exemptions from ACA requirements that may impose a financial burden.  It is important to note that the executive order does not include specific guidance about any particular ACA requirement or provision, and does not change any existing regulations.

According to the information letter, the executive order does not change law.  The ACA’s provisions are still effective until changed by congress, and taxpayers are still required to follow the law, including paying any applicable penalties they may owe.

For more information regarding Employee Benefits for your organization, or to speak with one of our advisors, email Billy MacNair, Senior Vice President at Brown & Brown Benefit Advisors at bmacnair@advisorsbb.com.

“This content is strictly informational and should not be used as specific advice on insurance products, legal, accounting and/or tax related matters. Insureds should always contact the appropriate licensed professional for their insurance, legal, accounting or tax needs.”


Brown & Brown Benefit Advisors