The Internal Revenue Service (IRS) recently announced increased penalty amounts for applicable large employer (ALE) mandate violations under the Affordable Care Act (ACA) Code Section 4980H for plan or policy years beginning in 2026 in Revenue Procedure 2025-26, which is found on irs.gov.
Typically, employers employing at least a certain threshold number of employees (generally 50 full-time employees including full-time equivalent employees, meaning a combination of part-time employees that count as one or more full-time employees) are ALEs and are subject to the following options:
1. Offer health coverage that is “affordable” and provides “minimum value” to full-time employees (as well as offer coverage to full-time employees’ dependents), or
2. Potentially make an employer shared responsibility payment to the IRS, if even one of their full-time employees receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace (Marketplace) or (Exchange).
The penalty for failure to offer minimum essential coverage to at least 95% of full-time employees (and their dependents) will be $3,340 per full-time employee (minus the 30-employee reduction) for 2026 under Code Section 4980H(a). In 2025, the penalty is $2,900.
Under Code Section 4980H(b), the penalty for each full-time employee who receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace (Exchange) will be $5,010 for 2026. In 2025, the penalty is $4,350.
Most small business employers will fall below the ALE size threshold and therefore will not be subject to the employer shared responsibility provisions. However, due to the complexities of Employer ACA reporting requirements, it is critical that employers with over 50 employees engage a professional firm, such as SPS/GZ, to assist with the coding, mailing, and e-filing of the required forms (Forms 1095-C and 1095-B) with the IRS.
SPS/GZ is a full-service tax reporting and stock plan administration firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to business clients of all sizes. We create and e-file, 1099 filing services, including 1099-NEC, 1099-MISC, Forms 1042-S, 1098-T, Affordable Care Act tax forms, and Forms 3921 and 3922. Additionally, we offer complimentary TIN-Matching services to help reduce errors prior to reporting, as well as In a thorough review of client data specifically looking for penalty triggers.
SPS/GZ provides year-round support for our clients, including post-filing assistance and comprehensive ACA penalty support to employers and entities of all sizes and whether or not they used SPS/GZ for the initial reporting of Forms 1095-C, 1095-B, 1094-C, and 1094-B.
Our complete and affordable solution allows administrators to simply upload their tax form data file to our secure portal in a few simple steps, and we handle everything else to keep your organization compliant. Contact us today at sales@greenzapato.com or call at (888)375-3049.
