IRS Announces 2025 Decreases for Employer Shared Responsibility Payments

The IRS has issued Revenue Procedure 2024-14, which outlines the adjusted excise tax amounts under the Employer Shared Responsibility provisions of the Affordable Care Act for 2025.

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Published: 02.22.2024

On February 12, 2024, the IRS released Rev. Proc. 2024-14 to provide the adjusted excise tax amounts under the Affordable Care Act’s Employer Shared Responsibility provisions (also known as the ACA Pay or Play Penalty) for 2025.

For background, employers with more than 50 full-time employees (including full-time equivalent employees) are subject to the ACA Pay or Play Penalty under Section 4980H of the Internal Revenue Code (the “Code”). Employers subject to ACA Pay or Play Penalty may be liable for a non-deductible excise tax under Section 4980H(a) of the Code if they do not offer minimum essential coverage to a sufficient number of full-time employees, or under Section 4980H(b) of the Code if minimum essential coverage is offered to the required number of full-time employees, but that coverage is not affordable or of minimum value.

2025 Adjusted Penalty Amounts

• The adjusted amount penalty for purposes of Section 4980H(a) of the Code is $2,900 (a $70 decrease from 2024).
• The adjusted amount penalty for purposes of Section 4980H(b) of the Code is $4,350 (a $110 decrease from 2024).

(Current and previous penalty amounts are available on an IRS Q/A page.)

To steer clear of ACA employer shared responsibility penalties, it's recommended that employers consistently verify the status of their full-time employees and offer them minimum essential coverage that meets both minimum value and affordability criteria. It's important to note that the IRS utilizes Letter 226-J to communicate potential liabilities under Code § 4980H to Applicable Large Employers (ALEs). Included with Letter 226-J is a response form (Form 14764), typically due within 30 days, allowing ALEs to indicate their agreement or disagreement with the proposed penalty. Employers and their advisors should remain vigilant for this correspondence to promptly assess and address any obligations.